A method includes forming a fin structure over a substrate; forming an isolation structure around the fin structure; etching the fin structure to form a recess in the fin structure; epitaxially growing a source drain structure in the recess; depositing a capping layer over a first portion of the source drain structure, in which the first portion of the source drain structure is over the isolation structure; recessing the isolation structure to expose a second portion of the source drain structure; and etching the second portion of the source drain structure, in which the first portion of the source drain structure remains over the isolation structure after etching the second portion of the source drain structure.