The authors present first-principles density-functional theory studies on the atomic structure of the In2O3-ZnO system. They find that the In2O3-ZnO system has a polytypoid structure, which consists of wurtzite (Zn/In)O slabs separated by single In-O octahedral layers that are inversion boundaries. Another type of boundary with polarity inversion formed by fivefold coordinated In and Zn atoms exists inside the (Zn/In)O slabs. The authors find that these polarity-inversion boundaries inside the (Zn/In)O slabs prefer a low-energy modulated structure. (c) 2007 American Institute of Physics.