The invention relates to a semiconductor device based on a composite substrate and a preparation method thereof. The preparation method comprises steps of selecting a Si substrate layer; growing a diamond layer on a lower surface of the Si substrate layer; growing an AlN nucleating layer on an upper surface of the Si substrate layer; growing a GaN buffer layer on an upper surface of the AlN nucleating layer; and growing an AlGaN barrier layer on an upper surface of the GaN buffer layer. The preparation method is advantaged in that the Si substrate layer with high quality and the diamond layerwith high thermal conductivity are combined to form the Si/diamond composite substrate structure, and high thermal conductivity of the diamond layer is utilized to solve a problem of poor heat dissipation caused by growing a high-power nitride semiconductor material purely on the Si substrate layer.