A semiconductor die has a first semiconductor die mounted to a carrier. A plurality of conductive pillars is formed over the carrier around the first die. An encapsulant is deposited over the first die and conductive pillars. A first stepped interconnect layer is formed over a first surface of the encapsulant and first die. The first stepped interconnect layer has a first opening. A second stepped interconnect layer is formed over the first stepped interconnect layer. The second stepped interconnect layer has a second opening. The carrier is removed. A build-up interconnect structure is formed over a second surface of the encapsulant and first die. A second semiconductor die over the first semiconductor die and partially within the first opening. A third semiconductor die is mounted over the second die and partially within the second opening. A fourth semiconductor die is mounted over the second stepped interconnect layer.