The purpose of this study is mainly to discuss the relationship between technology imports and trade vertical specialization. Traditional technology indices provide limited information and pay no attention to inter-industry linkages. As a result, they usually underestimate the effect of technology imports. Therefore, the primary objective of this study is to assess the inter-industry linkage effect generated by technology imports under an inter-industry linkage structure, and evaluate the diffusion effect. Another objective of this paper is to measure trade vertical specialization levels and trends in manufacturing industry, and to examine the relationship between international trade in vertical specialization and the diffusion effect of technology imports. Using longitudinal data and input-output tables from 1994 to 2002 in Taiwan's manufacturing industry, the empirical results reveal that the degree of the trade vertical specialization of the Taiwanese manufacturing industries has been climbing gradually from 1994 through 2002. Meanwhile, the level of diffusion of technology imports has also been on the rise. Besides, there exists a significant correlation between the diffusion of technology imports and the level of trade vertical specialization of the subsequent periods, as well as between the level of trade vertical specialization and the diffusion of technology imports of the subsequent periods.