From adversity comes opportunity, they say, and that thought will be weighing on the minds of Huawei execs in Shenzhen right now—because their adversity is quickly opening doors for others, and there’s no guarantee there will ever be a return to business as usual. We are still reeling from the devastating escalation in U.S. sanctions against Huawei, announced last week, but some of the ramifications are now starting to become clearer. Right now there’s no obvious escape route for China’s leading tech player, and others are circling.

Ahead of Trump’s blacklist, Huawei had overtaken Apple for global smartphone sales and was on course to overtake Samsung as well. Despite the blacklist, Huawei kept ahold of the world’s number two slot and did actually overtake Samsung in the second quarter this year, as the market reeled from the impact of coronavirus. But that will not last—the latest set of U.S. sanctions will heavily impact Huawei sales next year. But, putting Huawei to one side, Apple and Samsung now have a new China threat striking at their otherwise duopolistic dominance of global sales.

I’ve singled out Xiaomi before as the real beneficiary from Huawei’s decline in key overseas markets—especially in Europe. The domestic rival to Huawei remarkably bettered Huawei sales in Europe for the first time in the second quarter this year, growing revenues 65% as Huawei shrunk 17%. Xiaomi moved up to third place behind Samsung and Apple—Huawei dropped to fourth.

That gloomy picture for Huawei is now much worse. In its second-quarter results, issued this week, Xiaomi may have reported modest annual revenue growth (up 3.1%), but it was all about the detail. Xiaomi’s export markets have recovered to pre-coronavirus levels, with a major boost in higher-end smartphone sales—the exact segment where it needs to unseat Huawei. According to Xiaomi, “in overseas markets, shipments of our premium smartphones with a retail price of €300 or more went up by 99.2% year-over-year.”

The manufacturer—which has built its brand in the budget segment, has been upping its game to take Huawei market share outside China, replicating its larger rival’s lower priced / higher quality strategy to tackle aspirational markets in Europe in particular. This was the battleground where Huawei made its name as an export giant. Xiaomi’s strategy is clear—become the new Huawei. Industry analysts suggest Xiaomi is now on course to become one of the top-three global smartphone makers, overtaking Apple and ultimately targeting Samsung—if it can genuinely execute a new Huawei strategy.

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Those second quarter Europe numbers darkened Huawei’s celebrations on overtaking Samsung for global smartphone sales for the same quarter—a result driven by Huawei’s lock on its domestic market as Samsung recovered from the Covid-19 sales hits in other markets. It was always going to be short-lived. And that was all before Trump signalled a seismic shock to Huawei Smartphone sales from next year, denying the company access to the high-end chipsets it needs to power its flagship devices, to compete with other market-leaders.

Xiaomi has no such restrictions—and it still offers non-Chinese customers the full-fat Android experience, without the loss of Google software and services that had already hit Huawei so hard before the latest ramp-up in U.S. action.

“Our overseas business achieved robust growth against market headwinds and obtained remarkable results across key markets,” Xiaomi said in its results announcement. “Our smartphone shipments in the European market grew by 64.9% year-over-year, attaining a top three position in terms of market share for the first time.”

Of Huawei’s domestic rivals, Xiaomi was the one to recognise the staggering opportunity to fill the vacuum that Huawei would leave in overseas markets. Until this month, that was all about Google. Predicting that non-Chinese consumers would be reluctant to shift from full-fat Android to a new, Huawei alternative without their staples, Xiaomi plugged the gap. It had already proven its mettle in India, where it leads the market. It’s now picking up millions of Huawei users in Europe and elsewhere.

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Huawei’s future as a premium smartphone brand is uncertain—at least in the short to medium term. That will throw open the Chinese market and threaten Huawei’s lock. But in China, Xiaomi has Oppo and Vivo to contend with—the playing field is fairly level. Overseas, though, Xiaomi has been honing its approach. It’s nicely primed.

And so watch with interest over the next 2-3 quarters’ results—will Xiaomi continue to grow strongly in Europe and how much further will Huawei decline as its next flagship—the Mate 40—also launches absent Google and the pre-blacklist P30 gets that little bit older?

And then to next year, where at some point—perhaps fairly early—Huawei will exhaust its stockpile of chipsets, which will then heavily impact its ability to ship devices, both domestically and to export markets. If Xiaomi can position itself as the leading value for money premium device, then it has the chance to accelerate that growth and to expand its footprint into other markets. Huawei leveraged its strategy to break-up the Samsung and Apple market lock and there’s no reason Xiaomi cannot pick up where it’s larger domestic rival left off. If anything, the ground has been cleared and it will be easier this time around.

“Looking forward to the next decade,” Xiaomi told me in a statement, “we will firmly adhere to our ‘three guiding principles’ – never cease to explore and innovate, continue to offer products with strong price-to-performance ratio, and seek to make the coolest products, so as to let everyone in the world enjoy a better life.” Heavily funded R&D fueling cool products at the right price-performance-ratio—precisely what Huawei managed so successfully.

Meanwhile, we await some insight from Huawei as to what its chipset mitigation strategy is likely to be. The Huawei Developer Conference comes up next month—perhaps we will get some answers then.