It was decided by IBM for the IBM PC. The 8088 CPU had 1 MB of addressable memory, and some of it had to be reserved for the BIOS ROM, video hardware, and other

It was decided by IBM for the IBM PC. The 8088 CPU had 1 MB of addressable memory, and some of it had to be reserved for the BIOS ROM, video hardware, and other expansion cards. So the exact limit was a trade-off between application RAM and hardware expansions. You could also phrase it as “384 KB is enough for BIOS and expansion cards”. Moreover, 640K is kind of a natural division point in hexadecimal notation. Address segments in the 8088 memory model were 64K, hence segments 00000–90000 were for RAM, and segments A0000–F0000 were for ROM and hardware.