This research aims to investigate the changing production system of hosiery industry in Sheh-tou country, Taiwan. The textile firms, which are usually defined as labor-intensive industry, are thought to be approaching the status of ”Sunset Industry”, and will switch their locations to cheap labor heaven where Taiwan no longer belong to. However, most of Taiwan's hosiery firms still stay in Sheh-tou country, a small town in central Taiwan. The phenomena of staying refute the predictions made by conventional theoretical perspectives in industrial geography, such as location theory, product life cycles, and the new international division of labor. It implies the labor factor cannot explain the staying of traditional industry in the relatively costly labor area. In light of production system theory, the research concludes that the major reason for the hosiery industry to stay while it has to leave is the firms readjust their production chains by upgrading their skills, and build up a new customer-supplier relationship locally. In this sense, it is also a new spatial strategy to re-mould competitive advantage.