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China’s avoidance of the middle-income trap is an open debate among policymakers and scholars, especially after China’s economic growth has decelerated. China’s ascension to a highincome level is not only a domestic topic but also has profound geopolitical implications. The US, as the current hegemon, tries to prevent the contender’s economic rise by sanctioning China’s semiconductor sector. This scenario raises two questions: (i) how central is the semiconductor industry for China not to fall into the middle-income trap? and (ii) how prepared is China’s semiconductor sector to face a technological catch-up challenge? Based on the Sectoral Systems of Innovation and middle-income trap literature and an investigation of the semiconductor sector value chain, the present work builds an analytical framework to answer both questions. Throughquantitative and qualitative analyses, this work has three main findings: (i) China is dependent on state-of-the-art semiconductor technology to avoid the middle-income trap; (ii) China’s semiconductor sector is prepared for short-term catch-up challenges; (iii) China’s semiconductor basic research is insufficient for an eventual technological leadership for the long-term of its semiconductor sector, and China needs to address collaboration problems between Universities/Research Institutes and the Industry if it wants to increase its chances to become a high-income country.