A semiconductor device comprises a first semiconductor package including a first interconnect structure extending over a surface of the first semiconductor package. The first semiconductor package includes an interposer and a second semiconductor die disposed over the interposer. A second encapsulant is deposited over the interposer and second semiconductor die. A first semiconductor die is disposed over the surface of the first semiconductor package. A second interconnect structure extends from the first semiconductor die opposite the first semiconductor package. A first encapsulant is deposited over the first semiconductor package and first semiconductor die. A portion of the first encapsulant over the first interconnect structure and second interconnect structure is removed. A discrete component is disposed on the surface of the first semiconductor package. A build-up interconnect structure is formed over the first semiconductor package and first semiconductor die. The first semiconductor package includes a molded laser package.