Let's assume that all iPhones that are "repaired" by an Apple Store are actually replaced by the Apple Store. This matches my experience - go in with broken phone, walk out with brand new identical phone.
Then assume all the old phones are shipped to India/Vietnam/Sri Lanka/China where apple pays the smallest achievable wages for laborers to either:
1) swap out the broken displays, mainboards, etc. to produce a working "Refurbished" unit. Who does Apple sell these to? I don't see refurbished phones for sale on their website. Maybe to T-Mobile/etc who do sell some refurbished iPhones.
or
2) Disassemble the unit, throwing out everything except 100% known-good components, which get used for...what? Maybe new iPhones? Would apple ever include refurbished components...probably not. What do they do with all these known good but used components?
Either way, you can imagine that Apple might only be paying $10 or so to ship all these phones in a giant container to Asia and $20 or so for the labor of repair/disassembly. So maybe the "Self Service Part" really is being offered at the same materials price, minus Apple's straight internal labor cost.
I somewhat doubt this, but it's at least plausible.