Apple was in a patent dispute over this feature with Massimo. Their workaround is to calculate blood oxygen on the iPhone, using the sensors from Apple Watch.
The Apple Watch hardware is otherwise the same. The back of the watch shines light of a specific wavelength into your skin and measures the reflected light. Heart rate sensing uses green (525 nm) and infrared (850–940 nm) light; blood oxygen sensing added a red light at 660 nm in 2020.
The iPhone will now calculate the ratio of absorbed red to infrared light, then apply calibration constants from experimental data to estimate blood oxygen saturation.
The Apple Watch hardware is otherwise the same. The back of the watch shines light of a specific wavelength into your skin and measures the reflected light. Heart rate sensing uses green (525 nm) and infrared (850–940 nm) light; blood oxygen sensing added a red light at 660 nm in 2020.
The iPhone will now calculate the ratio of absorbed red to infrared light, then apply calibration constants from experimental data to estimate blood oxygen saturation.
More detailed writeup on how the technology works is here: https://www.empirical.health/metrics/oxygen/