A microelectromechanical system (MEMS) semiconductor device has a first and second semiconductor die. A first semiconductor die is embedded within an encapsulant together with a modular interconnect unit. Alternatively, the first semiconductor die is embedded within a substrate. A second semiconductor die, such as a MEMS die, is disposed over the first semiconductor die and electrically connected to the first semiconductor die through an interconnect structure. In another embodiment, the first semiconductor die is flip chip mounted to the substrate, and the second semiconductor die is wire bonded to the substrate adjacent to the first semiconductor die. In another embodiment, first and second semiconductor die are embedded in an encapsulant and are electrically connected through a build-up interconnect structure. A lid is disposed over the semiconductor die. In a MEMS microphone embodiment, the lid, substrate, or interconnect structure includes an opening over a surface of the MEMS die.