The emerging market technology story is quickly growing beyond one of just consumer adoption into innovation as well. In 2009, Chinese telecom equipment manufacturer Huawei led the world in patent applications. This was the first time an emerging market firm topped the list. That same year, firms located in the United States didn't even crack the top 10. Today, India provides more technology-based workers than any other nation, and China is home to more than 1,000 high-tech R&D facilities. A recent study by Boston Consulting Group found that seven of the top 10 telecom performers and four of the top 10 technology performers are based in India, Taiwan, Mexico, China and other emerging market economies. The developing world is moving past its "low-cost" production moniker and into one of high-tech modernism. This shift, plus positive local demographics and the increasing wealth of citizens, makes emerging market tech a great portfolio play.

Playing This Shift
Not all emerging markets are created equal when it comes to the technology sector. Some still rely heavily on low-cost labor manufacturing and commodities production for much of their GDP growth. (This in and of itself isn't a bad thing.) However, some have come to light as tech giants. By focusing on these countries, investors can gain that added leverage for the remainder of 2011 and beyond.

A Middle Eastern Jewel
The great tech miracle has launched Israel into the forefront of several high-technology industries including pharmaceuticals, aerospace, information technology and software. Exports of this sector have grown by nearly 8.5% annually. The nation features a highly educated workforce that has more engineers and PhDs per capita than any other country. In addition, Israel possesses more tech startups than any other nation on the planet. This education and entrepreneurship has spawned many commonplace tech innovations. Check Point Software (Nasdaq: CHKP) is credited with creating the first software firewall, and Netafim invented micro-irrigation. Israel is also quickly emerging as a biotech and healthcare leader, as it is home to pharma giant Teva Pharmaceutical Industries (Nasdaq:TEVA). The iShares MSCI Israel Index (NYSE:EIS) has more than 40% of its holdings dedicated to high-tech industries and can be used as a proxy for the nation.

A Japanese Rival
Switching gears from a pure manufacturing economy to one based on high technology, South Korea has managed to stay competitive on a global landscape. This has allowed the nation to maintain an edge over China. Featuring some of the fastest broadband speeds and a new smart grid/energy efficiency mandate, the country is continuing its push into the 21st century. South Korean firm LG Display (NYSE:LPL) is seeing worldwide growth for its energy efficient LCD and LED monitor panels, and Samsung's Mobile Display unit dominates the market for OLED screens used in mobile phones with more than a 95% share. Both the iShares MSCI South Korea Index (NYSE:EWY) and the IQ South Korea Small Cap ETF (Nasdaq:SKOR) can be used to play the nation's technology growth.

SmartPhone Success
Finally, Taiwan is emerging as a smartphone leader. Taiwanese chip maker Mediatek is developing with a new Google (Nasdaq:GOOG) Android chipset. This will cut costs of smartphones down to only one-tenth of previous amounts. Meanwhile, HTC phones are growing in popularity, and Hon Hai Precision continues to be the contract manufacturer of choice for many other smartphone designers. The iShares MSCI Taiwan Index (NYSE:EWT) features a 60% weighting toward technology companies.

Bottom Line
Emerging markets are quickly becoming technology innovators. Moving beyond just being low-cost production foundries, many are experiencing technological booms with regard to new products and equipment. Israel, South Korea and Taiwan are great examples of how this shift is taking place. Investors wanting to gain exposure to this new wave of tech growth can do so with these markets. (For related reading, see Investing In Emerging Market Debt.)

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Tickers in this Article: ECH, TEVA, CHKP, EIS, LPL, EWY, SKOR, GOOG, EWT

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