A semiconductor device has a first substrate. A first semiconductor component is disposed on a first surface of the first substrate. A second substrate includes a vertical interconnect structure on a first surface of the second substrate. A second semiconductor component is disposed on the first surface of the second substrate. The first semiconductor component or second semiconductor component is a semiconductor package. The first substrate is disposed over the second substrate with the first semiconductor component and second semiconductor component between the first substrate and second substrate. A first encapsulant is deposited between the first substrate and second substrate. A SiP submodule is disposed over the first substrate or second substrate opposite the encapsulant. A shielding layer is formed over the SiP submodule.