In a letter posted to its Web site on Friday, Apple says it has figured out what is causing the reception issues on its new iPhone 4 and will release a fix within a few weeks. Calling the cause of the problem “both simple and surprising,” Apple said they have been mistakenly reporting the number of signal bars since the original iPhone. The company said the formula it’s been using has been totally wrong and it will move to AT&T’s recommended formula.

“Our formula, in many instances, mistakenly displays 2 more bars than it should for a given signal strength,” reads Apple’s statement on the issue. “For example, we sometimes display 4 bars when we should be displaying as few as 2 bars. Users observing a drop of several bars when they grip their iPhone in a certain way are most likely in an area with very weak signal strength, but they don’t know it because we are erroneously displaying 4 or 5 bars. Their big drop in bars is because their high bars were never real in the first place.

Apple says the free software update will work for the iPhone 3G, iPhone 3GS and iPhone 4.

In its testing, Apple said “the iPhone 4’s wireless performance is the best we have ever shipped.”

“For the vast majority of users who have not been troubled by this issue, this software update will only make your bars more accurate,” said Apple. “For those who have had concerns, we apologize for any anxiety we may have caused.”