Not necessarily. I worked on the team the managed the OS for an embedded hardware project (radio equipment) and our disk was partitioned four ways:
1. current operating system
2. previous operating system (and next, on upgrade)
3. data partition, shared across both current and previous OS
4. factory reset partition
That means if we needed to do a factory reset we could just load the firmware archive from the fourth partition onto the second partition and execute a normal upgrade, albeit to an older version. Since upgrade packages were small, maybe 500MB?, we could easily cut a little space from the rest of the partitions to make it fit without having to increase the flash capacity.
That might be feasible for high margin products, but definitely not for consumer products. Case in point: enthusiast motherboards (as in, not the ones used for prebuilts) cheaping out and using 16MB ROM rather than 32MB, forcing them to remove features to accomdiate extra code needed to support new CPUs
1. current operating system
2. previous operating system (and next, on upgrade)
3. data partition, shared across both current and previous OS
4. factory reset partition
That means if we needed to do a factory reset we could just load the firmware archive from the fourth partition onto the second partition and execute a normal upgrade, albeit to an older version. Since upgrade packages were small, maybe 500MB?, we could easily cut a little space from the rest of the partitions to make it fit without having to increase the flash capacity.