A semiconductor device is made by forming first and second interconnect structures over a first semiconductor die. A third interconnect structure is formed in proximity to the first die. A second semiconductor die is mounted over the second and third interconnect structures. An encapsulant is deposited over the first and second die and first, second, and third interconnect structures. A backside of the second die is substantially coplanar with the first interconnect structure and a backside of the first semiconductor die is substantially coplanar with the third interconnect structure. The first interconnect structure has a height which is substantially the same as a combination of a height of the second interconnect structure and a thickness of the second die. The third interconnect structure has a height which is substantially the same as a combination of a height of the second interconnect structure and a thickness of the first die.