hey adobe in the version of Adobe Photoshop 2021 the function Convert an embedded or linked layered smart object introduced in Photoshop version 21.0 (November 2019 version) does not work well, the object is just rasterized! please fix it.
All Smart Object layer have a transform associated with the layer object. Only placed vector image file are called vector smart objects. Pixels are rendered by Photoshop and hardened for the layers object they can not be changed. These Pixels are Transform(interpolated) by the layers object transform to generate the layers pixels from the object's pixels. So smart Object layers are like Raster layers. Even vector smart object have no vectors in photoshop they are in the object's file and that file is processed to generate the pixels for the layer. Did you link the layer to the to an image file that is the same aspect ratio and sized as the embedded object was. So the layers transform for the object would work correctly. The transform would not be changed when you link the layer to and external image for the existing transform may be positions scaling and wrapping the object for the document composition.
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