A semiconductor device has a plurality of semiconductor die mounted to a temporary carrier. A prefabricated shielding frame has a plate and integrated bodies extending from the plate. The bodies define a plurality of cavities in the shielding frame. A penetrable material is deposited in the cavities of the shielding frame. The shielding frame is mounted over the semiconductor die such that the penetrable material encapsulates the die. The carrier is removed. An interconnect structure is formed over the die, shielding frame, and penetrable material. The bodies of the shielding frame are electrically connected through the interconnect structure to a ground point. The shielding frame is singulated through the bodies or through the plate and penetrable material to separate the die. TIM is formed over the die adjacent to the plate of the shielding frame. A heat sink is mounted over the plate of the shielding frame.