A semiconductor device has a carrier. A first semiconductor die is mounted to the carrier with an active surface of the first semiconductor die oriented toward the carrier. A dam structure is formed on the carrier and around the first semiconductor die by depositing dam material on the carrier with screen printing, electrolytic plating, electroless plating, or spray coating. An encapsulant is deposited over the carrier and around the first semiconductor die. The encapsulant has a coefficient of thermal expansion (CTE) that corresponds to a CTE of the dam material. The CTE of the dam material is equal to or less than the CTE of the encapsulant. The carrier is removed to expose the active surface of the first semiconductor die with the dam structure stiffening a periphery of the first semiconductor die. The semiconductor device is singulated through the dam structure.