1) You underestimate how critical prototyping has become, again likely since you say it's been a couple decades. Time to market has become more important, and verification has become harder as CPUs have gotten even more complex. FPGAs enable cosimulation and emulation, leading to faster iteration of both design and verification efforts and thus better TTM.
FPGAs are so important in the hardware development process that I would even say you're not a serious hardware company if you don't have any FPGA frameworks to design silicon.
2) As others have mentioned, FPGAs are also critical for low-latency workloads that require constant tweaks-- high frequency trading (ugh...) comes to mind. The need for "constant tweaks" could also be satisfied with just "normal" software, but that has higher latency as opposed to an FPGA, and FPGAs can get some crazy performance if you're willing to pay the price (south of 7 figures).
Overall sure, usage of FPGAs might be niche compared to, idk, Javascript; but it's commonplace/practically essential in hardware.
FPGAs are already incredibly popular. They're just mostly in things you are unlikely to personally own or know about. You're going to find at minimum one, but probably more FPGAs in things like big routers and other telecom equipment, e.g. cell towers, firewalls, load balancers, enterprise wifi controllers, video conferencing hardware, test equipment like oscilloscopes, sensor buoys, scientific instruments, MRI machines, LIDARs, high end radio equipment, or even just glue logic tying together other components, like in the iphone.
FPGA are being used in many type of applications where real-time is necessary and non-recurrent engineering (NRE) cost need to be minimized, for example here [1].
One classic example is that if you poke under the hood of any signal generator like AWGs, you will probably find an FPGA inside. As you probably aware since you in hardware business, AWGs are probably one of most common equipment in any electronic and electrical labs or companies.
[1]https://www.electronicdesign.com/technologies/fpgas/article/...
You are precisely correct. FPGAs are useful when your volume doesn't reach volumes where an ASIC would get amortized.
Networking companies (Cisco, Juniper, etc.) are classically big consumers of FPGAs.
Tektronix seems to make quite a bit of money and there is at least one FPGA in practically every test instrument they make. This holds true for practically all test instrument manufacturers.
I know a LOT of industrial automation and testing companies that generally have FPGAs in their systems. Both for latency and for legacy support (Yeah, GPIB still exists ...).
Yes, they aren't "Arm in a cell phone" type volumes, but that doesn't mean they aren't quite profitable if you can aggregate them.
Configurable as in one SKU is in several products, but not necessarily reconfigurable by the end user.