LLMs absolutely have a concept of ‘yellow’ and ‘paper’ and the verb ‘to be’. They are nothing BUT a collection of mappings around language concepts. And their connotative and denotative meanings, their cultural associations, the contexts in which they arise and the things they can and cannot do. It knows that paper’s normally white and that post-it notes are often yellow; it knows that paper can be destroyed by burning or shredding or dissolving in water; it knows paper can be marked and drawn and written on and torn and used to write letters or folded to make origami cranes.
What kind of ‘understanding’ are you looking for?