Toon manager Steve Bruce has been handed a £50m budget by owner Mike Ashley and intends to move for Phillips.
Phillips stepped up in Liverpool's hour of need alongside Rhys Williams after serious early-season knee injuries ended the campaigns of Virgil van Dijk and Joe Gomez, while Joel Matip and Fabinho were also out for long spells.
The former Stuttgart defender appeared 17 times in the Premier League and helped keep seven clean sheets as the Reds secured Champions League football and he managed to score in the last away match of the season at Burnley.
Bruce is reportedly set to bid for Phillips and may require £10m to get his man. However, the Clarets are also interested in a move for the 24-year-old.