Based on the ”Questionnaire of the Foreign Direct Investment (FDI) of Taiwan's Manufacture Sector” in 2004, surveyed by the Statistical Bureau, the Ministry of Economic Affairs of Taiwan, this paper uses Stochastic Frontier Approach to explore the impact of product diversification towards the performance of FDI in Taiwan's manufacture sector. We find that (1) FDI diversification improves the technical efficiency. (2) Horizontal diversifications in FDI have a significantly positive impact on efficiency, but the impact of vertical diversification is insignificant. (3) Firms in the fundamental industry and the technology-intensive industry are more efficient than those in the traditional industry. (4) Firms invested in China are less efficient than those invested in other areas.