A semiconductor device has a substrate including a base and a plurality of conductive posts extending from the base. A semiconductor die is disposed on a surface of the base between the conductive posts. An interconnect structure is formed over the semiconductor die and conductive posts. An adhesive layer is disposed over the semiconductor die. A conductive layer is disposed over the adhesive layer. An encapsulant is deposited over the semiconductor die and around the conductive posts. One or more conductive posts are electrically isolated from the substrate. The conductive layer is a removable or sacrificial cap layer. The substrate includes a wafer-shape, panel, or singulated form. The semiconductor die is disposed below a height of the conductive posts. An interconnect structure is formed over the semiconductor die, encapsulant, and conductive posts.