I don't think phones were ever the issue with Huawei. It was their routers and other network backbone devices, which are/were very popular as low cost alternatives to American companies like Cisco, Juniper et al. I guess the theory is that if a foreign actor is able to compromise a large part of the network infrastructure, that's a bigger risk than them being able to compromise some consumer-facing devices.

I've heard rumors from acquaintances in some western governments that Huawei quietly has much tighter links with the CCP than other Chinese tech companies, but they're just rumors. It was founded by an ex-PLA guy, so that's one tenuous link I suppose.

It's kinda funny because Xiaomi really embraces its Chineseness, like with that little kawaii rabbit mascot who wears a Lei Feng hat, but somehow they're still considered cool in some parts of the world outside of China because they make cheap phones and scooters and e-bikes and were one of the first Android ROMs that really put an emphasis on bringing iOS-style look and feel to the Android custom ROM community.

All that said, Xiaomi were still added to the US sanctions list earlier this year. Just recently their lawsuit prevailed and they have been taken off again: https://www.scmp.com/tech/tech-war/article/3133386/xiaomis-rare-victory-against-us-blacklist-could-pave-way-other