“he sounds out words perfectly when we read at home”
“he's not reading the WAY they want him to read - he likes to read whole words rather than breaking them into bits.”
“he's not really using phonics as they want him to.”
I think I’d want to know a bit more detail from the teacher, to understand exactly what the problem is. If a child has been taught phonics systematically at school and wasn’t previously taught using ‘look and say’ at home, I can’t imagine the teacher wanting to discourage that child from speaking whole words, as long as the teacher is confident that the child is segmenting in their head when they need to, and can do so out loud when asked, for specific words.
Might he be using guessing strategies sometimes? Is he skimming and rushing?
Regardless of what Gran75 says, without strong phonics knowledge there is likely to come a time when, being faced with harder words, a child starts to guess, assume meaning etc. which will mean that the child can’t reliably understand more difficult texts. The Y1 phonics check is in place to identify those children early on, before their poor reading strategies fail them in secondary school.
Phonics gurus such as @feenie and @norestformrz will explain it much better than I can. (I’m not a teacher.)
If the school are teaching phonics well and have identified a problem, I would be inclined to support the school (though I would ask for very specific information from the teacher).
If you’re worried about adding to his homework, tell the teacher you want to prioritise his phonics work at home, and will therefore be giving the projects a miss for the time being, until he has caught up.