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Anisotropic damage tolerance is examined in relation to the in-plane orientations of  biaxially aligned yttria-stabilized zirconia (YSZ) films fabricated using dual ion beam deposition and ion beam assisted electron beam deposition. It is shown that ion channeling and anisotropic ion etching are not associated with IBAD biaxial alignment. The mechanism of IBAD biaxial alignment is crystallographic orientation change to reduce ion damage. The aggregation of defects leads to the formation of low angle grain boundaries that enable the growth direction change. Damage-tolerant crystalline planes are aligned in the direction of the assisting ion beam through the growth direction change.