Correct, though it still is saved somewhere. Just like how TPMs in Computers can be exploited as well, this also can be. What I meant in my original comment was that the emergency mode did not clear that hardware chip's storage, which others said otherwise.
edit: corrected mistake according to ethan
I responded to that with:
That emergency mode that is activated by hitting the power button 5 times does not encrypt the storage. It merely disables the biometric authentication methods and possibly other things related to security, but it does not encrypt the storage. The phone stays in the AFU state and therefore the decryption keys are still somewhere in the hardware chip's memory.