Digital audio has to be converted to analogue via a piece of hardware called a Digital Audio Converter, or DAC.
All previous iterations of the iPhone contained a DAC within the phone. That part, along with the headphone jack, has been removed in the iPhone 7 line (the signal output of the lighting port is pure digital).
No, just no. The phoone still needs a DAC, an AMP and an ADC to function as a phone and drive the built-in speakers and mic.