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I thought it might have part of the circuit in Step 7 but now I wonder if its attached to the screen circuitry. Nonetheless I have calculated the magnetic sensor to be in the bottom left corner, if you are facing the screen in portrait. I am not sure if it is supposed to work by default but for it to work for me I had to install Magnet Screen Lock app. Handily the app will also tell you the strength of the magnetic field detected by the sensor.
Looks to me like its an ambient light sensor. You can see an opaque dot in the top left corner of front view photos.