Bundle extension before publishing
Context: https://code.visualstudio.com/api/working-with-extensions/bundling-extension#run-webpack
VSCode extensions grow quickly in size. They are authored in multiple source files and depend on modules from npm. Decomposition and reuse are development best practices but they come at a cost when installing and running extensions. Loading 100 small files is much slower than loading one large file. Bundling is the process of combining multiple small source files into a single file.
Closing this issue for now, since we are not aware of any problems caused by the current size of the extension and figuring out the correct Webpack configuration is not that easy.
Why this issue was created in the first place: VSCode Marketplace recommends keeping a relatively small package size (warning you every time you publish an extension bigger than a certain value). Bundling would make the activation time faster (so when the extension has already been installed previously, not for the first time).
Re-opening this as part of the initiative to reduce bundle sizes, and as this would also enable usage of the extension in web environments such as github.dev and vscode.dev.