It's (b) but they can't unlock the phone. They can make it easier to perform a brute force passcode attack against the device. The method to do this would be to

It's (b) but they can't unlock the phone. They can make it easier to perform a brute force passcode attack against the device. The method to do this would be to restore the phone with a modified (and obviously signed) version of iOS that bypasses the passcode failsafes: such as wiping the data after 10 failed retries, and the exponentially increasing password retry delay. The hardware imposes a limit of ~80ms on password attempts due to the nature of the hashing computations. So a four digit passcode could be brute forced in a maximum of 15 minutes if Apple were to install a purposefully hindered version of iOS on the device.