Commoditisation

The process by which a differentiated product becomes interchangeable, and its margin falls to the cost of production plus a competitive return.

A product whose gross margin fell from 42% to 28% over a decade is commoditising, and the direction is more reliable than any qualitative assessment.

It happens through patent expiry, through capacity addition, through the buyer learning that the alternatives are equivalent, and through technical standards making substitution easy.

Falling gross margin with rising volumes is the signature. Rising volumes alone is the story the company tells.