When you think of technology, what companies pop into your head? Perhaps technology giants such as Microsoft, Cisco or Intel? Or maybe you think of Silicon Valley and a bunch of computer nerds.

The United States has been the epicenter of technological innovation and home to the most powerful tech companies in the world, but that innovation and power is not-so-slowly shifting from North America to Asia.

Asia has kicked U.S. butt and taken over global leadership in the production of steel, apparel, electronics, toys, furniture, and cars and is now nipping at our technological heels.

Consider what happened at Applied Materials (NASDAQ:AMAT). Mark Pinto, the company’s chief technology officer, announced that he is picking up and moving from Silicon Valley to China. Pinto is the first CTO to actually relocate to China, which in itself is a watershed event, but also shows how important China is to Applied Materials and the changing landscape of technology investing.

Nobody paid much attention to Pinto’s move, but I consider it a monumental move for the high tech industry because it signals a major shift of power.

You see, Pinto isn’t some lonely computer nerd with no life. He has a young family (two boys, 11 and 12) and he wouldn’t have uprooted his family unless he felt it was absolutely necessary.

He certainly didn’t move because he likes Kung Pao chicken. Pinto is doing it because he and the Applied Materials management team understand the threat and the opportunity in China.

The threat stems from the fact that the Chinese are producing more engineering graduates and technological breakthroughs and opportunity because the market for 1.3 billion is so huge.

China has been the center for industrial manufacturing for years, but is now making inroads into high-technology, cutting-edge manufacturing for things like semiconductors, solar panels, flat-screen TVs, and cell phones.

China isn’t the only Asian country leapfrogging the United States as a technological center of influence. Get this: The world’s largest manufacturer of computer disk drives is Thailand! If you own stock in Western Digital (NYSE:WDC) or Seagate Technology (NASDAQ:STX), you need to get your head examined.

What happened to the U.S. television industry is about to happen to a big chunk of the high tech industry. Remember Zenith and RCA? Those U.S. companies pioneered television technology, but were eventually crushed by the Asian competition.

China and its Asian neighbors are going to turn many of today’s U.S. technological kingpins into historical footnotes in a matter of years. It will have painful (and profitable) implications for anyone who invests in technology stocks.

Here is the key to investing in tech stocks going forward: You need to steer clear of all tech companies that are competing against low-cost Asian competitors and get “long” any tech stocks that get most of their sales from Asia. I am sad to say that very few U.S. tech companies meet that criterion.

How do you find out who these budding Asian technology kingpins are? The new Bloomberg Hot Tech 50 list is a great place to start.

This year’s list shows that China is officially a technology powerhouse. Two of the five top companies are represented by Chinese firms. Tencent Holdings (TCEHY.PK) took the No. 1 spot, and Baidu (NASDAQ:BIDU) took third place.

Out of the top 50 technology companies in the world, 15 are from Asia, according to Bloomberg. Five companies from China, five from Japan, four from India — including software outsources Wipro (NYSE:WIT) and Infosys Technologies (NASDAQ:INFY) — and one from Taiwan made the list.

Tony Sagami

Now, I’m not suggesting you rush out and invest in any of the companies on the Bloomberg Hot Tech 50 list. In fact, I think there are a few mutts with fleas in that list, such as Western Digital (WDC) and Research In Motion (NASDAQ:RIMM). Plus, I think some of the best Asian technology companies are nowhere to be found on that list.

It is, however, a good starting point and more importantly, confirms how Asia is rapidly becoming a technology powerhouse.

If you’re more of an ETF investor, take a look at the Guggenheim China Technology ETF (NYSE:CQQQ) or Global X China Technology ETF (NYSE:CHIB).

CQQQ’S top holdings include (BIDU), Tencent Holdings (TCEHY.PK), Lenovo Group (LNVGY.PK), Kingboard Chemical (KBDCF.PK), (ALBIY.PK), (NASDAQ:NTES), BYD Corp (1211.HK) which is the auto/battery company that Warren Buffet owns 10% of, (NASDAQ:SOHU), and (NASDAQ:SINA).

CHIB owns many of the same Chinese technology companies with a few differences: SINA Corporation: 6.17%, Longtop Financial Technologies (NYSE:LFT): 5.85%, Tencent Holdings: 5.53%, China United Network Communications (not available to U.S. investors): 5.33%, China Mobile (NYSE:CHL): 5.32%, Shanda Interactive (NASDAQ:SNDA): 5.31%, Lenovo Group: 5.25%, ZTE Corporation (ZTCOF.PK): 5.21%, 5.18%, and AAC Acoustic Technologies (2018.HK): 5.07%.

If you’re a technology investor, you must stay aware of what is happening in China. U.S. tech companies fall into two basic groups: (1) tech companies that are getting their lunch eaten by low-cost Asian competitors or (2) tech companies that have made Asia, especially China, an important part of their sales strategy. Applied Materials, for example, gets almost 75% of its revenues from Asia as a result.

Other U.S. tech companies are getting clobbered by their Asian competition.

Example: Dell is rapidly losing market share to Lenovo and Acer.

Example: Intel is fighting for its life against Samsung Electronics and Taiwan Semiconductor.

Example: Electronic Arts (NASDAQ:ERTS) and Activision (NASDAQ:ATVI) are growing at a fraction of what Chinese gaming giants Shanda Games, Sina, and Sohu are growing at.

Make no mistake about it, you better be looking in Asia if you want to find home-run tech stocks.

Written By Tony Sagami From Uncommon Wisdom Daily

Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

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