Integrated circuit packaging system with encapsulation and method of manufacture thereof

A method of manufacture of an integrated circuit packaging system comprising:

• forming a carrier having a cavity and a carrier top side adjacent to the cavity;
• mounting an integrated circuit in the cavity;
• forming an encapsulation surrounding the integrated circuit;
• attaching a conductive channel to the carrier top side, the conductive channel over the encapsulation;
• forming an insulation layer over the encapsulation and the conductive channel, the insulation layer having an opening;
• and
• connecting an interconnect to the conductive channel, the interconnect over the opening.

An integrated circuit packaging system comprising:

• a carrier having a cavity and a carrier top side adjacent to the cavity;
• an integrated circuit in the cavity;
• an encapsulation surrounding the integrated circuit;
• and
• a conductive channel attached to the carrier top side, the conductive channel over the encapsulation.