Looking at pictures, it appears cameraless iPhones tend to have backs without camera holes / lumps, so some custom work is involved beyond just removing the module. Though there’s going to be a degree of “the government can afford it” in the pricing.

Drilling has some obvious issues, most notable if you go too deep you’re going to hit the screen.

And perhaps more importantly for the final price, if you’re paran^W concerned enough about security to the degree of commissioning custom iPhones without cameras, you’re also not going to let a random guy from the street drill into them.

(You also need to remove the front facing camera, which is also a more involved operation.)

You aren't the market. They don't really care to sell to you. Honestly, they probably actively don't want consumers to have these cameras for after sale support reasons. They would much rather sell you the standard camera and just tell you to turn off the radios if you don't want to use them.

These devices are sold to large institutions. If I need to give 30 employees at, say, a nuclear plant phones without cameras that they can take near classified/confidential equipment, I don't want a guy with a drill, I need a company that can provide 30 phones, a regular supply of replacements and a trustable piece of paper for the security auditors saying these devices are compliant. I need a phone that our security can glance at and know that it is ok. A phone with a drilled out camera is not the same as a phone with no camera for these purposes.

If I need to take photos inside that plant, and make sure that the photos will not be exfiltrated without going through a security audit, I need that camera.

At the scale that these institutions operate paying an extra $1k for a phone or camera that has security compliance outsourced is a no-brainer. Your sourcing team will spend more money investigating if the DIY route is possible than they will just buying from a trustable vendor.