The purpose of this study is to use the framework of Japanese employee skill formation to analyze the employee skill formation system in Taiwanese companies. By discussing relevant literature, we can learn about Japanese employee skill levels and the methods used to develop those skills. Using the same theoretical framework, we performed a case study of 4 representative machining operations in Taiwan's machine tool industry. By investigating and analyzing the background and methods of skill formation in the Taiwan model, we can sum up the structure of skill formation and reasons for success of the Taiwan model. This study found that (1) there are many differences in the background, methods and structure between the Taiwan model and the Japan model; (2) the reason for the success of Taiwanese companies is that they have the basic techniques to provide low-precision massproduced products. In addition, this study infers that developing specific enterprise skill to exploit different products and increasing the added value of products are probable ways of advancing Taiwan's machine tool industry .