Taiwan's manufacturing SMEs have played an important role in promoting trade, creating jobs, and developing certain industries. Yet, they might not have performed uniformly over time, nor always looked alike. This paper explores the changing position and the source of changes of Taiwan's SMEs during the last three decades. We have found, first, that the industrial development in the 1960s was attributable more to larger firms than SMEs. It was in the 1970s and after that SMEs gained competitiveness consistently. Second, among SMEs, the smallest firms employing fewer than 10 persons became progressively less important in Taiwan's manufacturing sector until the last sub-period between 1986 and 1991. Medium-sized firms, employing 10 to 99 persons, performed very well over time. As the survival principle suggests, keen competition assures efficiency among SMEs. Then, a quick response to market signals is also vital for survival. An industrial policy not against SMEs may be the best that SMEs can expect. A stable macroeconomic environment combined with an open market having low entry barriers and low transaction costs provides the best opportunity for SMEs to grow. The Changing Competitiveness of Taiwan's Manufacturing SMEs to grow.