I've never encountered this but agree, that can lead to a real hell of branching. Do you dead-end your releases and then backport certain things from your mainline to previous release branches?
Sounds like a headache but probably the best way in certain domains.
Yeah, each release might be, e.g, firmware version x.y.z.patchlevel, and then you backport fixes and release on patchlevel.
Some customers demand the absolute minimum amount of change - their interface is essentially fixed, all they want is fixes, no more improvements.
Besides firmware, I think this also get applicable when doing larger whitelabel software, each major customer might want to have a particular version they are focused on using.
Sounds like a headache but probably the best way in certain domains.