They practically die. A lot of software, such as work profile, banking apps, etc will stop working (depending on the work settings, bank rules, etc) if you don't update your phone. Also, your apps will no longer update as the app vendor doesn't release their apps for older API versions and will effectively make your app useless if their server side protocol changes.

> if you don't update your phone

Indeed, but the issue is that the phone manufacturer no longer supports the phone and release OS updates. And on Android, you could install unofficial mods to upgrade to a more recent version of the OS, but then some apps (banking apps for example) refuse to work because of... reasons, again making the phone unusable. And in a majority of cases, this has nothing to do with the hardware no longer being capable.