A semiconductor device has a substrate and first conductive pads formed over the substrate. An interconnect surface area of the first conductive pads is expanded by forming a plurality of recesses into the first conductive pads. The recesses can be an arrangement of concentric rings, arrangement of circular recesses, or arrangement of parallel linear trenches. Alternatively, the interconnect surface area of the first conductive pads is expanded by forming a second conductive pad over the first conductive pad. A semiconductor die has a plurality of interconnect structures formed over a surface of the semiconductor die. The semiconductor die is mounted to the substrate with the interconnect structures contacting the expanded interconnect surface area of the first conductive pads to increase bonding strength of the interconnect structure to the first conductive pads. A mold underfill material is deposited between the semiconductor die and substrate.