What's stopping Apple from adding a 1080P camera? Is component cost really the biggest deal for the business to still choose 720P or is there some technical/functional reason?
There indeed is a technical reason.
The image quality (or lack thereof) is abysmal. I cannot find any terms to describe the camera I could use on this forum with possibly minors in the audience. (Not that the minors wouldn’t have a much broader vocabulary than me...)
However, there are two technical reasons. First, the absolute amount of light entering the pinhole is very, very small. This leads to a lot of quantum noise (“graininess”) if the scene is not exceptionally well illuminated.
Second, the very small aperture sets the diffraction limit on the image plane so that increasing the sensor resolution (making the pixels smaller) would not increase the information in the image.
Both challenges are due to the very small aperture. This, in turn, is difficult to fix without increasing the distance from the lens to the image sensor. And that means a thicker lid.
During these WFH times I have been using different camera setups. If I need to look good (technically speaking, the rest would require a plastic surgeon to fix), I use a DSLR with a decent lens (HDMI + Elgato CamLink). Even when the resolution is downsampled to 720p and the stream is sent over Teams/Zoom/Whatever, the image quality is from another planet compared to any webcam. So, the number of pixels is clearly not the problem.
My suggestion to Apple is to toss the PoS called webcam. Instead, Apple should create the necessary SW for using iPhones and iPads as webcams. Their image quality is better than that of any reasonably priced webcam. (Yes, I have EpocCam Pro, but it has not proven to be too reliable in long meetings.)