Do I need to use iCloud on my phone

It's very much personal choice to set up iCloud account , some use iPhones just for calling and receiving .

If you want to use iCloud services set up icloud account https://support.apple.com/en-us/HT208681

If you sync data to icloud - yes.

If you back up data to icloud - yes.

Once you sign into your apple id account you're sign into the icloud account.