Xiao had miraculously beaten Dominic Dale and Judd Trump while playing with a broken hand, but the young Chinese potter couldn't make it any further as Widnes Warrior Higginson reached his first televised semi-final since he got to the final of the Welsh Open in 2007.
It was a fragmented match with both players missing several easy pots, but Higginson won't mind as he earned the right to play Lee for a place in the final, as well as boosting his hopes of gaining a top 16 ranking by the end of the season.
Higginson led 47-1 in the first frame before Xiao made an excellent 53 clearance, though he was helped by a ridiculous fluke on the final pink which missed its intended target by several inches but flew the length of the table into a baulk corner.
The next two frames saw Xiao make a string of errors and Higginson was able to win them both despite a top run of just 40. The Englishman improved in the next with a break of 69 to go 3-1 up.
In frame five, Higgins made 36 before missing a red to a top corner, and Xiao responded with 38 before failing on a red to the same pocket. Higginson made a calm 46 clearance to clinch the match.
"It was scrappy all the way through and it gets a bit embarrassing after a while," said 34-year-old Higginson. "We had about 50 chances each. Usually when you miss you have time to sit down and compose yourself, but I was getting straight back to the table then missing again! It was just one those games, but the main thing is that I got through.
"I've been consistent in the last couple of years getting to last 32s and last 16s, which is all well and good but I am here to win things. I've climbed the rankings and I should be getting to the later stages of tournaments.
"I'm guaranteed £20,000 now and the money is a massive bonus...but I wouldn't mind £70,000!"
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