I think this phenomenon is evidence of the value ceiling of IC work. What is the point of diminishing returns on paying an IC more money to do what they already do well vs hiring an additional younger and less expensive person to do the same thing, though not as well? Of course, an experienced IC can transition to mentorship, and different companies value this differently, but that may have a value ceiling as well.

Personally, I don't think it's necessarily a bad thing when IC's who max out their value writing code transition to other things. I agree not everyone makes the transition successfully, but it's a great opportunity for personal growth, and the potential for upside is high, since an organization can gain a leader with very nuanced and deep insights into product + market.