The memory chip industry has been booming for the past few years, and Micron (NASDAQ: MU) has taken advantage. The company has built up a large pile of cash on its balance sheet, partly the result of record profits and cash flow. That will come in handy now that demand and prices for memory chips are falling off a cliff.

Micron had about $12 billion of cash and investments on its balance sheet on Dec. 1, along with roughly $10.3 billion of debt. The company added $3.4 billion of that debt during the fiscal first quarter, a move meant to strengthen its cash position amid deteriorating industry conditions. Micron would have even more cash if it hadn't been buying back its own stock over the past couple of years. From fiscal 2020 through the first quarter of fiscal 2023, Micron dumped $4.2 billion into share buybacks.

When you operate in a commodity industry that's going through the worst downturn in over a decade, no amount of cash is too much. Micron's free cash flow was a loss of $1.5 billion in the fiscal first quarter alone. The company is slashing capital spending and costs, but further free cash flow losses are likely as the situation deteriorates. Micron's balance sheet is strong, but it's going to weaken considerably as this cycle plays out.

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Source Fool.com