The adoption of light-emitting diodes (LEDs) has surged due to their numerous advantages over traditional fluorescent and incandescent bulbs. LEDs are highly energy-efficient, long-lasting, and environmentally friendly, converting most energy into light with minimal heat generation. Encapsulation protects the device from mechanical stresses that could compromise the connection's integrity by forming a protective layer around the LED components, preventing damage from external forces such as vibration, shock, or thermal expansion, and ensuring reliable operation over time. A crucial aspect of LED manufacturing involves the relationship between design parameters and the formation of microvoids during the encapsulation process. Encapsulation, often using epoxy moulding compound as nonconductive material fills, ensures LED longevity and reliability. However, microvoids during the encapsulation process, degrade the performance and reliability of the device. This study employed volume of fluid (VOF) modelling in ANSYS Fluent to investigate how key factors such as LED structure, chip size, and dispensing conditions influence microvoid formation. The findings were compared with existing experimental data. Results identified a critical chip size threshold where microvoid formation becomes evident, leading to incomplete coverage at the LED’s base. As chip size increases, both microvoids and bottom gaps expand, underscoring the significant impact of chip dimensions on encapsulation integrity. This analysis highlights a trade-off between achieving complete bottom coverage and minimizing microvoid formation, demonstrating the delicate balance dictated by chip size variations. The nuanced interplay between these factors provides valuable insights into optimizing LED design to enhance manufacturing outcomes.