* Yuan's fall sparks worries about China's economy, Sino-U.S. trade war
* Steel makers, metal cos, shippers among biggest losers
* Semi-conductor shares down after soft TSMC earnings
By Hideyuki Sano
TOKYO, July 20 (Reuters) - Japanese stocks dropped on Friday as an extended decline in the Chinese yuan rekindled worries about the stability of the Chinese economy which faces rising risks from a major trade conflict with the United States
Japan's Nikkei share average fell 0.49 percent to 22,652.42 while the broader Topix shed 0.27 percent to 1,744.85.
The losses were driven by selling in the futures after the yuan weakened below 6.8 per dollar in the onshore trade for the first time in a year.
"Further falls in the yuan will heighten worries about capital flights like the one we saw in 2015-16. So there is knee-jerk selling," said Hideyuki Ishiguro, senior strategist at Daiwa Securities.
Steel makers, non-ferrous metal companies and shippers - the regular victims of trade war worries - led the losses with falls of 1.4 percent, 1.6 percent and 1.2 percent respectively.
Kobe Steel dropped 2.0 percent after the company was indicted by prosecutors over a data tampering scandal that shook the company last year.
Insurers fell 1.3 percent as their earnings are seen squeezed by continuous flattening in the yield curve.
Semi-conductor related shares came under pressure after Taiwan's TSMC, the world's largest contract chipmaker, trimmed its annual revenue and capital spending estimates on bleak demand from smartphone and cryptocurrency mining industries.
Tokyo Electron fell 2.6 percent and Sumco shed 2.8 percent.
Still, there are pockets of strength among technology shares with Murata Manufacturing rising 1.3 percent and Keyence up 1.1 percent.
Advertising firm Dentsu sank 7.5 percent in heavy trade, with market players citing an unexpectedly weak sales from its French rival Publicis. (Editing by Shri Navaratnam)