NEW YORK (CNNMoney.com) -- The iPhone 4 "grip of death" signal-strength problem stems from a bug that has been with Apple's bestselling smart phone all the way back to the original iPhone, Apple announced Friday, saying it had found a "simple and surprising" cause for the widely reported reception issues.  But Apple's "explanation" raised more questions than it answered.  "Upon investigation, we were stunned to find that the formula we use to calculate how many bars of signal strength to display is totally wrong," the company wrote in a statement posted on its website. "Our formula, in many instances, mistakenly displays 2 more bars than it should for a given signal strength."  That means, for example, that iPhones sometimes display four bars when they should be displaying two. Apple (AAPL, Fortune 500) said users reporting a significant drop in bars when they hold their iPhone 4 are probably in an area of "very weak signal strength" but were unaware of that because the phone displayed four to five bars.  "Their big drop in bars is because their high bars were never real in the first place," the company said.  Apple said it will release a free software update in the next several weeks to fix the glitch. It will use a new formula recommended by AT&T (T, Fortune 500), the iPhone's exclusive carrier, for calculating how many bars to display. Apple said it will also make the first three bars a bit taller to make them easier to see.  The company did not say if the signal-bar problem affects the iPad 3G, which also uses AT&T's network. Apple also did not explain why the phone only seemed to show significantly fewer bars when it was gripped on the bottom-left hand side -- a detail that suggests hardware, not just software, plays a role in the glitch.  Calls to Apple for comment were not returned.  The problem is not confined to the iPhone 4: The bad formula has been present in every iPhone all the way back to the 2007 original, Apple said. As a result, the update will be available for the second-generation iPhone 3G and third-generation iPhone 3GS, though Apple did not mention an update for the original iPhone.  An AT&T spokesman declined to comment on the issue and directed all questions to Apple.  Software bug or hardware flaw?  Apple's announcement implied that its upcoming software update will fix all issues related to the iPhone's signal bar and reception issues, but gadget enthusiasts say hardware design choices are also coming into play on the iPhone 4.  The gripes have to do with the iPhone 4's external antenna. When bare skin, which is a strong electrical conductor, comes in contact with a phone's antenna, severe disruption can take place. A detailed technical review at AnandTech illustrates the drop-off; Mobile networking specialist Richard Gaywood created a diagram of the problem.  Most new smart phones -- and all previous iPhone models -- have internal antennas. All smart phones suffer some signal loss when held, but those with internal antennas have a natural buffer between the hand and the antenna.  A rubber band or Apple's $29 "bumper" case will do the trick for the iPhone 4, which Apple had suggested last week as a possible solution to the reception issue.  When the problem first arose, several users sent e-mails to Apple CEO Steve Jobs. To at least one of the e-mailers, Jobs replied, "Just avoid holding it in that way." Apple later released a statement saying that gripping any phone will cause reception to drop a bit.  On Friday, Apple revised that statement, saying that "gripping almost any mobile phone in certain ways will reduce its reception by 1 or more bars," but a loss of four or five bars was "a far bigger drop than normal."  Apple said that most customers have reported improved signal strength on the iPhone 4 compared to the iPhone 3GS, a claim several independent reviews back. "There's no doubt in my mind this iPhone gets the best cellular reception yet," AnandTech's reviewer concluded after extensive signal testing.  Apple apologized for the confusion: "For those who have had concerns, we apologize for any anxiety we may have caused," it wrote.  Apple noted that customers can return their iPhones for a full refund 30 days after purchase if they remain unsatisfied, but it typically charges a $10 restocking fee when the phones are returned.  First Published: July 2, 2010: 10:17 AM ET
The iPhone has been incorrectly displaying the amount of signal bars since the original due to an incorrect formula, according to Apple.