A semiconductor device is made by mounting a first semiconductor die to a first substrate, forming a first encapsulant over the first semiconductor die, and forming a second encapsulant over the first encapsulant. The second encapsulant is penetrable, thermally conductive material. A second semiconductor die is mounted to the second substrate. A bond wire electrically connects the second semiconductor die to the second substrate. A passive circuit element is mounted to the second substrate. Leading with the second encapsulant, the first substrate is pressed onto the second substrate so that the second encapsulant completely covers the second semiconductor die, bond wire, and passive circuit element. The second encapsulant is then cured. A third encapsulant is formed over the first and second substrates. A shield can be disposed over the second semiconductor die with openings for the second encapsulant to flow through when pressed onto the second substrate.