This is the most ridiculous thing I read this year - and I've read a lot of mad stuff. Let's assume your justification is true and Apple cares so much about the privacy that they implemented this feature just to protect them and that they don't care about the money from repairs.
So, in your scenario, someone would have to steal my phone, disassemble it, and replace the face unlock recognition chip with a custom version. Let's assume this is easy technically, i.e. you could actually do it in the iPhone 12 and the phone would happily accept the modified version (not a small feat if you ask me). Now, while I don't think it's absolutely impossible, the means to accomplish this are usually available to nation-state actors, and in cases like this one the xkcd 538 comes to mind.
So, in your scenario, someone would have to steal my phone, disassemble it, and replace the face unlock recognition chip with a custom version. Let's assume this is easy technically, i.e. you could actually do it in the iPhone 12 and the phone would happily accept the modified version (not a small feat if you ask me). Now, while I don't think it's absolutely impossible, the means to accomplish this are usually available to nation-state actors, and in cases like this one the xkcd 538 comes to mind.