A semiconductor device has a semiconductor die. An encapsulant is deposited over the semiconductor die. A first insulating layer is formed over the semiconductor die and encapsulant. A plurality of first grooves is formed in the first insulating layer. A first conductive layer is formed over the first insulating layer and in the first grooves. A second insulating layer is formed over the first conductive layer. A plurality of second grooves is formed in the second insulating layer. A second conductive layer is formed in the second grooves. An interconnect structure is disposed over the second conductive layer and the first and second grooves. The first conductive layer disposed in the first grooves and the second conductive layer disposed in the second grooves form a dampening structure under the interconnect structure. The dampening structure improves the TCoB and BLR of the semiconductor device.