The company announced that it would give free protective cases to buyers to alleviate reception problems, but the controversy has continued.
'Out of proportion'
Analysts warned the the company's previous near infallible reputation for quality was under threat from the public furore, but Steve Jobs, the CEO of Apple, maintained there was nothing wrong with the iPhone 4, and said the reception problem was shared by other smartphones.
"This is life in the smartphone world. Phones are not perfect. Most every smartphone we tested behaved like this," Jobs said at a July news conference wherehe apologised for the malfunction.
"This has been blown so out of proportion, it's incredible," he told reporters and analysts in an auditorium at Apple's Silicon Valley headquarters in California.
The company sold more than three million units of the iPhone 4 in the first three weeks after its launch.
Bob Mansfield, Apple's senior vice-president of Macintosh hardware engineering will assume Papermaster's responsibilites, a company spokesman said.
"Mr. Mansfield already manages groups that create many of the key technologies for the iPhone and iPod touch, including the A4 chip, Retina display and touch screens," Dowling said.
This is not the first time Papermaster, a former IBM executive, has faced controversy.
Apple hired him in November 2008, luring him away from the computer giant, where he had worked for 25 years.
A federal court in the US initially barred Papermaster from working for Apple, but the lawsuit was eventually resolved and he started working for the company in April of 2009.