The physical layer device PHY is a key component that connects each network element to the physical medium. The physical layer device PHY is responsible for completing the functions in Layer 1 of the Interconnect Reference Model (OSI). Usually, we can integrate the physical layer functions into a chip.

What is it?
PHY refers to the physical layer, which is at the bottom of OSI. The physical layer generally refers to the chip that interfaces with external signals. The physical layer handles signals, line status, clock reference, data encoding, and circuits for data transmission and reception. This also provides a standard interface to data link layer devices.
PHY is the common abbreviation for the physical layer of the OSI model.
An Ethernet PHY is a chip. A layer can send and receive frames and connect a device to a physical medium. For example: fiber optic or copper cables.
Typical PHYs include PCS (Physical Coding Sublayer) and PMD (Physical Media Dependent). PCS actively encodes and decodes information in the process of sending and receiving. The purpose of this is to make it easier for the receiver to recover the signal.
The network card works on the last two layers of OSI, the physical layer (PHY) and the data link layer (MAC).
The physical layer controls signals, line status, clock reference, data encoding, and circuits for data transmission and reception. This also provides a standard interface to data link layer devices. The physical layer chip, we can call it PHY.
The data link layer performs various tasks. These tasks include addressing, creating data frames, error checking, transmission control, and providing standard data interfaces to the network layer. The MAC controller is the chip in the data link layer of the Ethernet card.
About the application
These two parts integrate together in many network cards.
The Mac bus connects to the PCI bus. The Mac bus connects to PHY. The network cable connects PHY.