In semiconducting materials special boundaries play the key role in crystal growth. They introduce an abrupt structural and chemical anisotropy, which is readily reflected in an unusual microstructure evolution, whereas their local structure affects the physical properties of semiconducting materials. These effects, however, can be exploited to tailor the electronic and optical properties of the materials, as demonstrated in this review. The presented topic fits in the field of preparatory stage of phase transformations, manifested through evolution of chemically induced structural faults. In the noncentrosymmetric structure of ZnO, inversion boundaries (IBs) are the most common type of planar faults that can be triggered by the addition of specific spinel-forming dopants (Sb2O3, SnO2, TiO2). In addition to conventional HRTEM techniques several new methods were developed to resolve crystallography and atomic-scale chemistry of IBs. The absolute orientation of the polar c-axes on both sides of the IB was determined by a novel quantitative microdiffraction method, providing a reliable identification of crystal polarity in noncentrosymmetric crystals. To determine sub-monolayer quantities of dopants on the IB, we developed a special technique of analytical electron microscopy using concentric electron probe (CEP) in EDS or EELS mode, providing more accurate and precise results than any other available technique. Knowing the local crystal chemistry of IBs we were able to design experiments to identify their formation mechanism. IBs nucleate in the early stage of grain growth as a dopant-rich topotaxial 2D reaction product on Zn-terminated surfaces of ZnO grains. Soon after their nucleation, ZnO is epitaxially grown on the inherent 2D phase in an inverted orientation, which effectively starts to dictate anisotropic growth of the infected crystallite. In very short time the grains with IBs dominate the entire microstructure in ZnO ceramics via IB-induced exaggerated grain growth mechanism. This phenomenon was used to design physical properties of ZnO-based varistor ceramics, whereas the bottom-up approach demonstrated here provides the basic tool for microstructural engineering of functional materials in virtually any system that is prone to formation of special boundaries.