If Apple is to keep their word about guaranteeing the privacy of non-CSAM photos (which this whole discussion is about them not doing a very good job of), then they would only be able to do that with photos stored in iCloud because of this technical specification as to how the identification process works. That being said, other photos across your device are still monitored in a different way. For example Apple will scan photos that you send or receive via iMessage to automatically detect if they're nudes, and if you're underage, they will block them/send a notification to your parents.