A semiconductor device is made by forming a first conductive layer over a carrier. The first conductive layer has a first area electrically isolated from a second area of the first conductive layer. A conductive pillar is formed over the first area of the first conductive layer. A semiconductor die or component is mounted to the second area of the first conductive layer. A first encapsulant is deposited over the semiconductor die and around the conductive pillar. A first interconnect structure is formed over the first encapsulant. The first interconnect structure is electrically connected to the conductive pillar. The carrier is removed. A portion of the first conductive layer is removed. The remaining portion of the first conductive layer includes an interconnect line and UBM pad. A second interconnect structure is formed over a remaining portion of the first conductive layer is removed.