Phonics is an educational approach to teach reading by systematically teaching sound-letter correspondence and the rules that govern orthography (or spelling).
For deaf cuers, the relationship between cued language and phonics is similar to the relationship between spoken language and phonics experienced by hearing children. That is, children who are exposed to cued language from an early age can acquire English passively and will have access to the underlying phonology of the language. This knowledge is essential for learning to read through a phonics-based approach.
Sometimes, individuals think that Cued Speech is part of a phonics-based approach. First, it should be reiterated that Cued Speech is intended for natural interpersonal interaction as a modality for language and is not a educational philosophy or approach. However, it is conceivable that the manual cues for Cued Speech could be used with non-Cued Speech users as part of a phonics approach. The use of cues introduces both visual support and kinesthetic feedback that reinforce multisensory instruction. Cued Speech, therefore can be useful for highlighting the underlying building blocks, or phonemes, to indiviudals who has deficits in phonemic awareness. The application of Cued Speech for reading instruction may be viable, but was not the primary intention of Cued Speech. The original purpose of Cued Speech was to support literacy by providing children a modality through which to acquire traditionally spoken languages. It's design supports literacy by providing access to phonology. Phonemic awareness has been shown to be important precursor to learning to read.