A semiconductor device has a substrate including a recess and a peripheral portion with through conductive vias. A first semiconductor die is mounted over the substrate and within the recess. A planar heat spreader is mounted over the substrate and over the first semiconductor die. The planar heat spreader has openings around a center portion of the planar heat spreader and aligned over the peripheral portion of the substrate. A second semiconductor die is mounted over the center portion of the planar heat spreader. A third semiconductor die is mounted over the second semiconductor die. First and second pluralities of bond wires extend from the second and third semiconductor die, respectively, through the openings in the planar heat spreader to electrically connect to the through conductive vias. An encapsulant is deposited over the substrate and around the planar heat spreader.