Most businesses fail in general, so claiming that most businesses fail due to too much competition is sort of a moot point.
Regarding your examples:
x86: I'm pretty sure that Intel had a great deal of legal control of that market, and they've certainly not been shy of anti-competitive techniques.
mom-and-pop computer stores: I believe they were displaced largely by websites like NewEgg and TigerDirect, as the model they have allows them to undercut them and in many ways be more convenient.
donut franchises: There's not a shortage of donut shops, and I've seen a decent number of indie donut shops
mobile devs: that was basically the same niche as websites and flash games, neither of which has ever been a particularly reliable method of making a living.
That the diversity of a market doesn't always increase doesn't mean that there is an inevitable and irreversible race to the bottom. A market only has a limited carrying capacity, and when it exceeds that, there will be some degree of pruning. That doesn't mean that the population is doomed, though.