The demand for precision instruments has closer relationship with national industrial development and national income. With the domestic high-tech industry development and increasing precision of product demand, precision instruments have become important basic industries. Therefore, through a better understanding of the competitiveness and advantages and disadvantages of this industry, we can get the future development direction of the correct settings, and the investment strategy of the industry to adjust the status of。 In this study, based on SWOT analysis, and further to diamond model theory proposed by scholars Porter,we analyze the current precision equipment manufacturing in the overall market in which the various relative environmental conditions and competition analysis by Trade Specialization Coefficient. In 2007, the import volume manufacturing of precision instruments of Taiwan is 322.9 billion Yuan, 84.48 billion yuan of total exports; in terms of international competitiveness is also a input specialization, and for non-competitive state of the vertical division of labor. According to "the functional hands theory" (Tsai-Mei Lin, 2006), to enhance their technical standards and industrial competitiveness we should introduce its advanced technology from Japan, the United States and Germany actively. On the other hand, the main three exporting countries is the United States, mainland China and Hong Kong as. Our country showed the relative strength to Hong Kong of the output of a vertical division of labor specialization competitive posture, but decreased year after year; although mainland China has gradually enhanced the competitiveness of the situation, it is still below the level of 0.3 division of the state. Therefore, based on "the functional hands theory" to deal with China, Hong Kong and other places actively carry out technology transfer and to increase investment in order to ensure that the expansion of the international market.