(It's a little more complicated than that though. Yes, individual letters do matter, but good readers aren't mentally sounding out every word they read. Rather, their eyes take in every letter at once and their brains instantly recognize the word. That's why you can probably still read this paragraph even though the middle letters in every word are scrambled.)
Phonics is important for being able to read words your brain isn't already familiar with, which is especially critical during the learning process when "words your brain isn't already familiar with" is like 95% of words. Context clues can help there too, but those aren't nearly as easy or accurate as just sounding out the word.
Fun anecdote: I recently had a chance to re-experience that learning process myself after listening to a long fantasy book series on Audible with lots of made-up terms (names, cities, magic items, etc), then going on a fan forum later and seeing those same words spelled out for the first time ever. Phonics was invaluable to me in puzzling out which words corresponded to which terms I was familiar with from listening to the series.
If you read the whole article I think you will agree that what you call "phonics" is actually just "reading"...
All of the rest, the context, cues, word-recognition, is something on top of seeing the letters, knowing the sound the make individually, knowing the sound they make when put in sequence. Good readers still see all the letters, don't work on guessing context, looking for cues, or seeing words as unified pictures.