A semiconductor device includes a first package component and a second package component. The first package component has a first die formed on a first substrate. A second package component has a second die formed on a second substrate. A thermal isolation material is attached on the first die, wherein the thermal isolation material thermally insulates the second die from the first die, and the thermal isolation material has a thermal conductivity of from about 0.024 W/mK to about 0.2 W/mK. A first set of conductive elements couples the first package component to the second package component.