The popular view of innovation is one lone, brilliant scientist, laboring away in a lab late nights, working in fevered industry to bring his brilliant idea to fruition ex nihilo. It's a great picture and one that has inspired a lot of movies and especially comic books. However, like the superpowers so prevalent in movies and comic books, this idea is also a fairy tale. Actual, real-life innovation is very much a community-centered and public affair. It is not done, and in fact cannot be done, in secret. Instead, it is a steady process of small, incremental steps build upon existing practices and ideas.
Innovation is answering the question, "How do we do this better" In order to answer that question, you always have to be doing something already. Famous examples of innovation like the Wright brothers inventing flight or Alexander Graham Bell inventing the telephone did not happen out of thin air. In both cases the people credited for the invention were working with all the information and ideas of earlier iterations of the projects that didn't work out. In fact, in Bell's case, there was some controversy about whether or not he or Elisha Gray was the first to develop a "practical harmonic telegraph," which is what they were both working towards. There is some indication that Bell saw Gray's patent application and quickly appropriated the ideas to perfect his own telegraph. Only after then was the famous "Watson, come here, I need you" story able to happen. But I digress. The point is that both men were trying to improve upon the existing telegraph - Gray to transmit music, and Bell to transmit voice. It was a logical next step.
If the western world is no longer concerning itself with practical things like manufacturing, there is no first step upon which to build a second step. The people who are closest to building next-generation displays, for example, are going to be the ones who improve upon those designs and create a better version. This is already done entirely in Asia, as one can easily see at the IMID conferences every year. But it will also soon be done in next-generation tablets and handsets as well. Apple is the great innovator in those fields, but all of their production is done in Asia. It won't take much for some of the top talent involved in actually producing Apple's designs to think of a way to do it better. Then, with the huge amount of money and resources available to them in China, the small next step is going to be creating an Apple clone which can do everything that the next Apple phone can do, but better. In fact, this has already been tried a few times, with knock-off Apple clone products being circulated in underground tech journalist circles. It's going to continue to happen until some innovator hits upon the right combination of features to be the iPhone killer. And it's going to happen easily because all of the resources are in Asia.
So even though today the ideas come from the West and the manufacturing comes from the East, soon both ideas and manufacturing will come from the East.