The passcode is encrypted, the phone MAY be encrypted. Both Apple and Google changed practices ~8 years ago after a shitstorm hit them both, and there were no more default back doors to their products.

That said Apple has also done a bang up job of integrating their software and hardware on those devices, meaning you cannot separate the storage from the device, as it is actually paired to the device and a unique key value, while not exactly encryption it is of sorts.

All of that to say, No, I do not think Apple needs to unlock the phone if it compromises all phones. I mean weren't we already assured that they acted alone?

Living in a free society is not always safe, but I will accept that risk to continue to live in a free society.