* Nikkei on track to end week flat
* Tokyo Electron, Screen Holdings fall
By Ayai Tomisawa
TOKYO, Aug 17 (Reuters) - Japan's Nikkei rose on Friday morning as trade tensions appeared to ease and gains in U.S. shares supported sentiment, but chip-related stocks fell after Applied Materials disappointed investors with worse-than-expected earnings forecasts overnight.
The Nikkei share average rose 0.5 percent to 22,303.69 in midmorning trade. The benchmark index is on track to end the week little changed, following two straight weeks of declines.
Investors await developments in the U.S.-China trade conflict after the two countries said on Thursday they would hold lower-level trade talks next week.
"Investors have started to expect that there could be a sign of progress towards ending the escalating trade war," said Takuya Takahashi, a strategist at Daiwa Securities. "But if such hopes are betrayed, the stock market may take a hit."
The Wall Street Journal reported that the talks in Washington would take place on Aug. 21 and 22, just before $16 billion in new U.S. tariffs on Chinese goods take effect, along with an equal amount of retaliatory tariffs from Beijing.
Cyclical stocks such as shippers, metal firms and financials outperformed. Mitsui OSK Lines surged 2.2 percent, Sumitomo Metal Mining advanced 2.1 percent and Mitsubishi UFJ Financial Group rose 1.7 percent.
Chip equipment makers were sold, with Tokyo Electron falling 1.4 percent and Screen Holdings down 2.7 percent after Applied Materials Inc, the world's largest supplier of equipment used to make chips, forecast current-quarter profit and revenue below Wall Street estimates.
The broader Topix added 0.6 percent to 1,697.11. (Editing by Sam Holmes)