Apple boss Steve Jobs admitted the company is "not perfect" as he announced iPhone 4 customers would receive free rubber cases in an attempt to fix problems with the handsets.
An internet campaign was launched following complaints about the so-called "death grip" -- a phenomenon which could see the phone's signal drop when grasped in the left hand.
But at a press conference at Apple's base in Cupertino, California, Mr Jobs promised iPhone 4 customers a free rubber case -- which protects the phone's in-built antenna and cures signal fade -- or a full refund.
"We're not perfect. We know that, you know that," he said.
It follows a saga which rumbled on since the new iPhone 4's launch last month.
Two weeks ago, Apple issued a statement blaming software and promised a patch.
But earlier this week an influential American consumer magazine said independent testing proved the phone's hardware was at fault.
Mr Jobs said three million iPhone 4s were sold since its launch three weeks ago, with only 0.55pc of customers reporting problems.
Apple also claimed rival handsets showed similar results when gripped across the antenna.
Mobile phone industry expert Ernest Doku, at Omio.com, said Mr Jobs' performance at the press conference was enough to restore faith in the brand.
"I'm sure there were a few people out there wanting to see Apple squirm a little," he said.
"But after bamboozling us with talk of signal algorithms and anechoic chambers, they appeased their fans by offering some freebies."
He added: "It was as close to an admission they failed as we are likely to get, and by giving away free cases and offering a refund Apple has managed to come out of this looking like the good guy."