It's rather unclear what you are plugging into what.
The Phantom firmware is ONLY updated by downloading a file and placing it on the SD card.
The updating can take a good 30 minutes and there will be various flashing lights, beeping and restarting.

The controller is updated from the app while connected to the mobile device, howeer early updates used the same firmware file as the phantom, usually put on a USB flash drive and plugged in where you connect the USB normally.

You may have a conflict with two apps trying to open when you connect the P3?
The only change seemed to be the new app, there is no enforced upgrading of firmware but it will nag you if a new version is available.
Generally it's update all or do nothing - If your original set up works that's great, if you update the P3 firmware to latest you'll also need the controller updated and the latest app for everything to play nice..