An integrated circuit packaging system, and a method of manufacture thereof, including: a device formed as a die having a conductor with ends exposed on opposite sides of the die; a first surface depression on the device, the first surface depression surrounding one of the ends of the conductor exposed at a stack side of the die; a first component over and connected to the conductor, the first component surrounded by the first surface depression; and a first underfill between and in direct contact with the first component and the device, the first underfill substantially filled to a side of an inner edge and within a perimeter of the first surface depression isolated from the conductor.