If it needs done , what is your thesis that they should stop after the first semester. Would you fly on a rocket designed and built by people who could not fail?
This is nonsense basically, given the topic.
My undergrad university graded prelims (first year exams) but did not use the results beyond that. Everything graded was in a huge blob known as finals at the end of year 3 (then also year 4 by the time I arrived).
There were a variety of reasons this was the case. Degrees were traditionally determined by finals, and the people in charge didn't exactly have what may be known now as a "change mindset". Modules were just starting to come into vogue, but they didn't like the idea that undergrads could go into the last exam having forgotten and discarded lots of what they'd learned already. Also modules were new fangled.
And finally, because prelims were kind of irrelevant given the finals results. Anything learned in year 1 you will have gone far beyond by year 3. The later stuff matters more and is dependent on the earlier stuff anyway, so anything from year 1 is implicitly tested in year 3.