VS Code has a clear scope to be smart light-weight editor. It fits to mainstream needs indeed, but not for firms trying to build domain specific IDEs.
Theia does not have problems with VS Code. It embraces great tech and UX behind VS Code and makes it available to build custom products with ability to rebrand UI, get full control of developer experience, and so on.
There is no competition, but rather collaboration. So far Theia adopters were building own products by porting interesting tech from VS Code and contributing bug and feature requests back. Sometimes even by going and proposing fixes for them in VS Code.
Theia does not have problems with VS Code. It embraces great tech and UX behind VS Code and makes it available to build custom products with ability to rebrand UI, get full control of developer experience, and so on.
There is no competition, but rather collaboration. So far Theia adopters were building own products by porting interesting tech from VS Code and contributing bug and feature requests back. Sometimes even by going and proposing fixes for them in VS Code.