iPhone 7 Microphone not working after iOS 15.7.6 Update

Issue: My iPhone 7 Plus was working perfectly until immediately after I installed the 15.7.6 update. Since then, I can no longer pick up phone calls - the audio / speaker symbol is greyed out when I make calls or receive calls. The only way I can take a call is by using my Apple Watch. In addition, if I try to record a Voice Memo, nothing happens - I'm unable to record.

Triage and seeking support from Apple:

I went ahead and I did factory reset and also reset all settings, problem did not resolve.

I called Apple customer service and they mentioned that it is hardware issue and suggested me to visit apple store.

I visited apple store, and they said it is hardware related issue and asking me to pay $349 to replace whole hardware unit since they cannot replace just microphone/speaker. Touch ID button sometimes does not work. They completely ignored this.

Questions that is still unanswered:

1. If it is hardware related issue, then why did phone work before upgrading to new OS version?
2. As a customer, I am not at fault OS version compatibility. What Apple can do resolve it?
3. In the store, they mentioned that it is an issue with carrier. I swapped sim with another phone and confirmed that is not an issue with carrier.
4. No satisfactory response was given by West County Manager in St Louis MO when I mentioned. this phone stopped working after OS update.
5. Store updated OS to most recent version and problem is still not resolved.
6. I am sorry to say that it is like forcing customer to buy new phone after introducing issues in older phone with OS update. This is an unethical behavior. Can someone please help?