Embedded has already split: You've got 8-bit, 16-bit, and some in-between MCUs that never ran Linux in the first place. You've got 32-bit MCUs that never ran Linux in the first place. You've got FPGAs that never really even run software. And you've got "application processors" like the ARM Cortex-A series that get used for "embedded Linux" in some cases. ARM Cortex-A series won't release any more 32-bit ISAs, so that mostly just leaves RISC-V as a potentially-relevant 32-bit ISA that might get new CPU designs. That's a small niche within an already small niche in embedded. Most embedded systems aren't using Linux, they're using an RTOS or bare-metal code.
8 and 16 bit are dying pretty rapidly. You can make some pretty tiny 32 bit CPUs (e.g. https://github.com/YosysHQ/picorv32 is a RV32 with only a couple thousand transistors). On a budget optimized process node (e.g. 28nm), the core is absolutely tiny and all of the cost comes from the (s)ram.
Yeah, I expect them to get relegated to Chip–on–Board (the little black epoxy blobs you'll see in 4-function calculators, cheap multimeters, & the like) ASICs as integrated MCUs and as soft cores in some FPGAs. I'd only go with an 8-bit or 16-bit chip at the extreme end of cost–constrained ultra–high–volume design already, 32-bit MCUs are cheap enough for everything else.
