As others explained, display failure isn't the primary reason for that. It's that leading zeros do give an indication of what range you're in. By leaving them, but reducing them to a visible placeholder, you get the advantages of leading zeros AND the advantages of zero blanking.
I think the main goal should be to display the measurement in a unambiguous way without any redundant leading zeros or strange symbols. Those cause more harm than good, because the measurement value can be misread easily. If a range indication is needed then add a dedicated one. Presumbaly this whole mess was created by minimizing BOM cost, since misusing the digits and drivers already available as a range indication is cheap, no additional segments and drivers are needed. But there's no excuse for graphical displays besides ignorance.
I don't think you understand the value of visual placeholders. They reduce cognitive load, not increase it, because they let you know exactly what you're
not seeing, which is often easier than seeing. (Do you drive a car? If so, then you'll know how the purpose of glancing in your mirrors isn't actually to see what's there, but rather to verify what
isn't there: another car.)
Another example of how placeholders reduce cognitive load: dimmed commands in software menus. Dimming ("graying out") commands that are unavailable, as opposed to actually removing them, helps users a) learn what commands are available, even when not available right now, b) help you understand the relationships between the circumstances that make a command available or not, (and you don't go around looking for commands that are unavailable but invisible because they were removed) and c) arguably most importantly, they keep commands from moving around. That last one reduces cognitive load, because you know that for example, that copy, cut, and paste always come in that order, so if you need paste, it'll always be third, even if cut and copy are currently dimmed.
Regardless, my entire point is that using something that's neither a space nor a zero has massive advantages.