Privacy , like security , has its own “threat models” and compromises depending on who you’re trying to get privacy from. So this is absolutely a privacy feature and it astonishes me that amount of people who don’t get this and try a No True Scotsman.
My mail provider would need to parse my mails to get info about what services I use. Identity providers have those apps registered and grand token for specific services. They know exactly when a user is logging to specific services. This data doesn't even need to be evaluated further, Apple would have a neat list about the services you use.
Still, the usual mail registration offers more flexibility and gives the user more control. So, email registration is a privacy feature if you argue like this.
Security wise it is a decent solution, but also a single point of failure. It is hard to argue this to be a privacy feature. It is only one if you trust Apple more than the other services and different forms of auth isn't possible.
