Enable Auto Compact by default in VS Code (#12739)

* feat(vscode): enable Auto Compact by default

The SDK-based extension has no fallback context management: with auto
compact off, hitting the model's context window fails the request with a
provider error and retrying keeps failing (the legacy extension truncated
the oldest half of the conversation in this situation). The CLI already
defaults compaction on (agentic); align the extension with it.

* chore: add changeset for Auto Compact default-on

.changeset/proud-crabs-compact.md

@@ -0,0 +1,5 @@
+---
+"claude-dev": patch
+---
+
+Enable Auto Compact by default so long chats automatically compress conversation history instead of failing at the model context limit. It can be disabled in Settings → Features → "Auto Compact".

apps/vscode/src/sdk/cline-session-factory.ts

@@ -904,7 +904,9 @@ export async function buildSessionConfig(input: SessionConfigInput): Promise<Cor
 	}
 
 	const stateManager = StateManager.get()
-	const globalUseAutoCondense = stateManager.getGlobalSettingsKey("useAutoCondense") ?? false
+	// Auto compact is on by default; keep this fallback aligned with the
+	// `useAutoCondense` default in shared/storage/state-keys.ts.
+	const globalUseAutoCondense = stateManager.getGlobalSettingsKey("useAutoCondense") ?? true
 	const compactionStrategy = readCompactionStrategyGlobally()
 	const enableCheckpoints = stateManager.getGlobalSettingsKey("enableCheckpointsSetting") ?? true
 	const useAutoCondense = input.taskSettings?.useAutoCondense ?? globalUseAutoCondense

apps/vscode/src/shared/storage/state-keys.ts

@@ -274,7 +274,7 @@ const USER_SETTINGS_FIELDS = {
 	hooksEnabled: { default: true as boolean },
 	yoloModeToggled: { default: false as boolean },
 	autoApproveAllToggled: { default: false as boolean },
-	useAutoCondense: { default: false as boolean },
+	useAutoCondense: { default: true as boolean },
 	subagentsEnabled: { default: false as boolean },
 	worktreesEnabled: { default: false as boolean },
 	preferredLanguage: { default: "English" as string },

apps/vscode/webview-ui/src/context/ExtensionStateContext.tsx

@@ -298,7 +298,7 @@ export const ExtensionStateContextProvider: React.FC<{
 		onboardingModels: undefined,
 		mcpResponsesCollapsed: false, // Default value (expanded), will be overwritten by extension state
 		yoloModeToggled: false,
-		useAutoCondense: false,
+		useAutoCondense: true,
 		compactionStrategy: "basic",
 		subagentsEnabled: false,
 		worktreesEnabled: { user: true, featureFlag: false },