Update(31.01.2013):-

As I diagonised, that by forcing the headset pin after inserted, forcing it towards the home button side makes mic working on phone calls. So I have decided to take a try by replacing the below item from ebay. cost 10USD  http://www.ebay.in/itm/251235295874?ssPageName=STRK:MEWNX:IT&_trksid=p3984.m1497.l2649#ht_841wt_1141. And replaced following the youtube video. How to replace headphone jack in iphone 4. Now the phone is working perfectly and there is no mic problem.

 

article :-

For couple of weeks, my iPhone 4 was giving a problem during phone calls, i.e my voice would not be heard by the other caller. This was repeating for some calls, some calls not. Few days back, all of sudden, all the calls via phone app, my voice was not heard at all . Searched around the forums to find the reason, also walked into imagine store in Chennai. Since, my iPhone 4 bought in US, no warranty, they said no service, no coverage in India.

I called Apple support team, they said, reset and restore. A week back, I have upgraded my OS. So, straight forward I ruled out any issues with OS reset.

 

Next day, i wanted to test the cause of the problem, since mic works normal for voice memo and other 3rd party mic applications.

 

Then, through  the research I found, one of the reason for this problem.   Hope Apple can find a permanent solution for this.

 

One of the possible issue with headphone jack leading to mic.

 

I tried using bluetooth, loudspeaker mode and headphone. The mic non-functional remained. After I read one of a forum post and cleaned the headphone jack with ear cleaning bud. The problem became permanent. But there was a lot dust when I cleaned.

 

Finally, I tried putting the dummy 3.5mm pin(without mic, PC 3.5 mm headphone jack or original headphone set) and shake the jack. The MIC WORKS. As we all know, there is a spring/mechanical system, which detects the headphone if inserted. Possibly that mechanism is giving a problem. When forced and pressured the headphone jack pin sidewise,  the bottom mic starts working. When I leave the side pressure on the jack, the mic again stops working. I felt, for my iPhone 4 the workaround is here.  Though the problem remained, when jack is removed.

 

Next day, I took a bit of coconut oil and cleaner liquid to ear buds and again cleaned the headphone jack port by keeping the phone up down to avoid liquid going down to the main board. I cleaned it and left it to dry over the night.

From next day morning onwards, the mic is working fine. No drop of voice. It is working fine now. 

Apple iPhone’s has some serious issues with rusting of metal contact points, the home button also was misbehaving for long time, one need to press hard, but after a gentle clean, it is working normally.  Thing not to forget, you feel handicapped when your smart phone doest work, and if you need to use button keypad phones.