Phillips celebrated his 36th birthday during the pre-season tour of Austria and has been linked with a move to Leicester.
But Blues boss Alex McLeish has told the former Sunderland marksman he still has a role to play.
Phillips told the Birmingham Mail: "I have had my chat with the manager. I'm happy where I am.
"I have said all along that I was determined to help this club get in the Premier League and now I intend to enjoy a season in it.
"If the club didn't want me, then that's a different matter.
"But the manager has assured me that the club do still want me. He wants me to play a part this year.
"He wants my experience here and I'm happy with that and what he
"I know I will get minutes (on the pitch) this year as it's only natural. There will be injuries, loss of form, so I am going to get my chance and I just need to be patient."
Phillips was Blues 14-goal top-scorer when they gained promotion from the Championship promotion last season.
He added: "I hope that I will still be able to score in the Premier League.
"I think that's one of the reasons why the manager does want to keep me.
"It's the last 20 minutes when you need a goal and hopefully I can be that player who comes on and gets it."
Birmingham have agreed a fee with Galway United for Republic of Ireland Under-21 international James O'Shea.
Dubliner O'Shea, 20, can operate on the right side of midfield or as a striker and has played three times for the Irish Under-21s.
He will undergo a medical and discuss personal terms with Alex McLeish's side.
O'Shea, captained Galway last season and scored 10 goals, has also played for Home Farm and Bray Wanderers.