In this article, we demonstrate using lock-in thermography (LIT) to perform fault isolation of leakage on a board-mounted device with rough, heterogeneous epoxy encapsulation. It is interesting to observe LIT spot shifting either on the failing unit’s reference pin or the failed pin using a different lock-in frequency. The protection diode of the reference pin is triggered by LIT and the electrical behavior should not be affected by varying lock-in frequencies (0.1 Hz to 25 Hz). The reason for the shifting hot spot is a non-uniform morphology in the epoxy encapsulation, which consists of different thicknesses and voids. This complicated epoxy encapsulation morphology results in a non-uniform heat conduction pathway when a different lock-in frequency is used. In this study, a LIT hot spot will stabilize and remain in a fixed position when the lock-in frequency is increased to greater than 5 Hz and the phase shift is directly proportional to the square-root of the lock-in frequency. This indicates that the heat conduction becomes stable under such a condition, and the phase shift value can still be used for relative depth localization. By overlaying LIT and X-ray imaging, an accurate position of the fault location in the X-Y plane can be detected. A quick and non-destructive 3D fault isolation method for complicated system level failure can be achieved in this way.