I really doubt this is how it works. But if you insist, then whatever helps you sleep at night.
That is exactly how it works.
Frequent Locations: Your iPhone will keep track of places you have recently been, as well as how often and when you visited them, in order to learn places that are significant to you. This data is kept solely on your device and won't be sent to Apple without your consent. It will be used to provide you with personalized services, such as predictive traffic routing.