VSC being marketed as open source is certainly a grey area (there are arguments both in favor and against), but it's not a bad situation as it seems. IntelliJ

VSC being marketed as open source is certainly a grey area (there are arguments both in favor and against), but it's not a bad situation as it seems. IntelliJ IDEA is a competitive "open source based" product, with a significant market share (which qualifies as "viable competitor not under Microsoft's thumb"). VSC's "base open source" product is actually equally or more capable than IDEA - see VSCodium; its existence is proof that in worst-case scenario, a capable open source editor would still exist. Although there are some omissions, I think that given the MIT license, in theory a competitor could also build a series of commercial plugins - if I'm correct, this would actually be an interesting scenario.