Wow, that is some decent gouging there. While the "by the book" recommendation is likely to replace it, I'm with the others that it doesn't look like a big weak link.
But I'd be curious how it got there. Simply lack of lube when installing? Maybe.
You might take a measurement to the area though. I wonder if a standard bearing being slid over an axle made for a Set 20 could do that?
This a big or a small bearing? If a small, then this is very unlikely as it probably would have split the bearing long before being able to install it. If a big bearing though, they're pretty close to the Set 20 size, so perhaps that was the problem.
Paul