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Apple iPhone 4

"To customers that are having problems, I apologize to them," said Steve Jobs, Apple's chief executive. "We're not perfect."

The Cupertino, Calif.-based company said it will offer free cases to iPhone 4 owners until September 30. People who already bought the $29 bumper can get a refund. In addition, AT&T subscribers who are still unhappy and want to return the device can get a full refund and get out of their contracts without penalties.

"We're not feeling right now that we have a giant problem we need to fix," he said. "The data supports the fact that the iPhone 4 is the best smartphone in the world."

Jobs admitted that the iPhone 4 drops calls when directly touched in the lower left corner. But he also defiantly maintained there was nothing wrong with the device's wraparound antenna and that all phones suffer from similar problems.

"This has been blown so out of proportion that it's incredible," he said. "There is no 'Antennagate.' There is a challenge to the entire industry to improve antenna performance so that there are no weak spots."

To prove his point, Jobs showed videos of rival smartphones from BlackBerry maker Research in Motion, Samsung and HTC, all losing signal strength when held in a certain place.

"This is life in the smartphone world -- phones aren't perfect," he said. "And it's a challenge for the phone industry, and we are all doing the best that we can. But every phone has weak spots."

RIM's chief executive Mike Lazaridis said, "Apple's attempt to draw RIM into its self-made debacle is unacceptable. We have avoided designs like the one Apple used in the iPhone 4 and instead has used innovative designs which reduce the risk for dropped calls, especially in areas of lower coverage."

Meanwhile, Motorola's chief executive Sanjay Jha said, "Antennas on the outside of products have known issues. Despite the fact that they lead to smaller phones we have avoided them because consumers don't like being told how to hold the phone."

The iPhone 4, whose wraparound frame doubles as an antenna, was initially praised for its innovative design. But that same stainless steel band is also susceptible to dropping calls if covered by the hand in a certain way.

Earlier last week, the company said it found the root of the reception problem, caused by a software glitch that displayed more signal "bars" than it should have -- leading people to believe that they had a stronger signal. Apple has now released an update to fix the display, but its problems worsened when Consumer Reports painted a more serious picture.

On Monday, the influential magazine said its tests showed a hardware design flaw. It also suggested that free cases would be a "good first step toward identifying and finding a solution for the signal-loss problem of the iPhone 4."

Still despite the negative press, which has spawned a spate of lawsuits, insatiable demand for the iPhone 4 has led to supply shortages. Jobs said the company has sold more than three million units since it went on sale June 24, adding that it is "perhaps the best product made by Apple."