Apple admitted that there were problems with the iPhone 4‘s reception but did not blame the bad reception on the antenna design, but on the formula to calculate the number of signal strength bars to display.

“Our formula, in many instances, mistakenly displays 2 more bars than it should for a given signal strength,” said Apple in a statement released last Friday.

Apple reminds user that the signal drop is exaggerated but “were never real in the first place.”

Apple will be adopting AT&T’s recommended formula for calculating how many bars to display for a given signal strength and will be reporting the signal strength more accurately. Apple will also be increasing the size of the signal bars 1, 2 and 3 a bit taller.

Apple will release a free software update in a few weeks and will also target the iPhone 3G and 3GS.

Rumors of the “death grip” were also tackled by Apple in their letter. “Gripping almost any mobile phone in certain ways will reduce its reception by 1 or more bars. This is true of iPhone 4, iPhone 3GS, as well as many Droid, Nokia and RIM phones,” said Apple.