The Sqlite team in stuck in the classic dilemma. They are stuck with their existing thing because it is so big, that you can't just stop the world for you existing users and redo it. Meanwhile some small innovator comes along and builds the next thing because why not, they don't have anything holding them back. This is classic Innovator's Dilemma and Creative Destruction. This has of course not happened yet and we have to wait and see if Turso can actually deliver, but the Turso team is extremely talented and their git repo history is on fire, so it is definitely a possible scenario.
You say that like SQLite is a for profit company competing for market share or one of several rival projects in a corporation trying to not be canceled.
It's an open sourced project! It's public domain!
If you make an open source project that is heavily used and widely lauded for a quarter century before being supplanted by a newer solution that's better, do you know what that is?
A success! You did it! You made a thing that was useful and loved!
Nothing lasts forever; there's nothing wrong with a project filling a niche and then gracefully fading away when that niche goes away.
Funny you should say so because I actually made an effort _not_ to use corporate business terms, because open source project definitely do compete with each other both for developer and user attention and for general prestige, which in turn may be leveraged to get access to funding and other development resources in various ways. And in an even funnier turn of events Sqlite development is actually funded by a for-profit company that sells Sqlite support contracts: https://www.sqlite.org/consortium.html
SQLite is a for profit company competing for market share. They're one of those companies that gives the product away for free, and sells professional support and custom development, as well as a few add-on modules. Pricing table here: https://sqlite.org/prosupport.html
You may think these are ludicrous prices, but think of it as market segmentation. It seems like they're only a few employees, so if they get, like, 300 companies in the entire world to sign up for email support, they earn a pretty respectable salary. Or if they get, like, four companies in the whole world to join their consortium, and nobody else buys anything. In fact, there are four consortium members on the homepage: https://sqlite.org/index.html and possibly others who chose not to be listed. So we have (it seems) two people getting paid $600k per year to work on this. This is a software SMB - they're not trying to hyperscale or squeeze every penny, just make a living selling a good product at a steady rate.
This model only works, of course, because SQLite is a genuinely good product that everyone loves and uses for free in every open-source project. It wouldn't work if a copy of SQLite cost even $10, because then we'd all be using MariaDB. It might not even work if it was proprietary but free.
I agree with your broad point, but it's worth pointing out that SQLite very much is a product that is being sold and that aspect of things is not open source.