Thanks to Taiwan's cheap and diligent labor, the 1960s and 70s were a period of strong foreigninvestment in Taiwan. Since the 1980s, however, Taiwan's economic environment has begun to change. In linewith such changes, patterns of manufacturing by foreign companies in Taiwan have also changed. Amongforeign firms, Japanese companies have been and continue to be the most important. In general, as Taiwan'sbusiness environment has changed, Japanese firms have not left at the drop of a hat, but rather used Taiwan'sevolving manufacturing advantages to remain on the island. By studying changes in Japanese affiliated firms inTaiwan over time, it is possible to understand both the development and prospects of Japanese affiliated firms inTaiwan as well as real patterns in Asia's overall development. This paper uses 15 case studies collected by the author to organize the experiences of Japanese affiliatedfirms in Taiwan - past patterns, changes, and current situation. The paper divides Japanese affiliated firms intothree categories - upgraders, diversifiers, those comprehensively engaged with the island. The paper alsoidentifies four major Taiwanese competitive advantages -shop floor manufacturing technology, innovative hightechnology, production networks, and an internationally ready workforce. Based on these categories, concepts,and observations, the paper goes on to consider future trends for Japanese affiliated firms in Taiwan. Suchanalysis has implications for both theory and practice.