Ok, so it could at least plausibly have been local processing. I haven't been able to find out what kind of CPU/etc is in the device, and most of the features would have been easy to implement on the almost any hardware. It would have been even stranger to
also include a powerful (expensive) CPU to do a bunch of audio processing, but if there are techniques that work on $30 devices, that opens up a much broader range of cheaper hardware.
(I still think it's insane that the bean counters and value engineers let them include a microphone that wasn't needed.)