A semiconductor device has a prefabricated multi-die leadframe with a base and integrated raised die paddle and a plurality of bodies extending from the base. A thermal interface layer is formed over a back surface of a semiconductor die or top surface of the raised die paddle. The semiconductor die is mounted over the raised die paddle between the bodies of the leadframe with the TIM disposed between the die and raised die paddle. An encapsulant is deposited over the leadframe and semiconductor die. Vias can be formed in the encapsulant. An interconnect structure is formed over the leadframe, semiconductor die, and encapsulant, including into the vias. The base is removed to separate the bodies from the raised die paddle. The raised die paddle provides heat dissipation for the semiconductor die. The bodies are electrically connected to the interconnect structure. The bodies operate as conductive posts for electrical interconnect.