As “its” is used to indicate possession by “it”, “its” is an exception to apostrophe-s construction as used to indicate possessive forms.
Most, if not all, pronouns work that way though.
“The man’s arm” becomes “his arm” not “him’s arm”. “The woman’s arm” becomes “her arm” not “her’s arm”. Similarly, “the robot’s arm” becomes “its arm” not “it’s arm”.
I don’t really care if people use “it’s” instead of “its” , but I don’t think it’s a unique exception. The only thing that’s unique is that it is pronounced the same way as if you tacked an apostrophe and an s on the end. If we used the word “hims” instead of “his”, I’m sure people would start putting an apostrophe in there too.
Right, and for pronouns you don’t just put apostrophe s after. So you don’t make “it” possessive by adding apostrophe s just like you don’t add apostrophe s to “he” or “him” to make it possessive.
If you treat the pronoun “it” like a regular (non-pronoun) noun instead of like other pronouns, that is itself an exception.