One of the most important subjects for semiconductor packages is preventing cracks which occur when the entire package is exposed to a soldering temperature of 215 to 260°C in the surface mounting technology. Cracking, as seen during temperature cycling tests is also a problem to be addressed. This paper reports the design of epoxy encapsulating compounds for highly reliable semiconductor devices which require the following properties: (1) toughness of matrix resin, (2) low moisture absorption, (3) high adhesion to insertions, and (4) reduction of thermal stress. The moisture absorption was lowered and the toughness was improved by using hydrophobic epoxy resins and high filler loading. The latter reduced the thermal stress, and it was effective for lowering the moisture absorption and increasing the fracture toughness of molding compounds. The reliability tests results were also considered in terms of physical properties of molding compounds.