SHANGHAI (Reuters) - Alibaba Group, China's biggest e-commerce firm, will spin off the team developing its Aliyun mobile operating system, which Google Inc claims uses aspects of its own mobile operating system Android.

Alibaba Group will invest $200 million in the spin-off as the team developing the mobile operating system expands, said founder and chief executive Jack Ma in an internal memo on Thursday.

The Aliyun mobile operating system hit a snag last week when a planned smartphone launch in Shanghai with Taiwan's Acer Inc was cancelled due to what Alibaba said was interference from Google.

At the heart of the issue was Aliyun, which Alibaba said was self-developed but Google said contained aspects of Android.

China's smartphone market is expected to top the United States as the world's largest smartphone market this year. Earlier in the week, Alibaba said it bought back half the stake Yahoo Inc owned in the company for about $7.6 billion.

(Reporting by Melanie Lee; Editing by Ryan Woo)