It appears that we can - theoretically - build a single static library that includes both simulator and iPhone and iPad.
However, Apple has no documentation on this
I have spent many hours trying to build a fat static library that will work on armv7, armv7s, and the simulator. Finally found a solution.
The gist is to build the two libraries (one for the device and then one for the simulator) separately, rename them to distinguish from each other, and then lipo -create them into one library.
lipo -create libPhone.a libSimulator.a -output libUniversal.a
I tried it and it works!