Universian

On the heels of Galaxian's success in 1980, Namco found themselves with a surplus of boards for it. They decided they wanted to make a new game using this hardware, one of them being a game called King & Balloon, which didn't prove to be very successful. The next game they considered to use Galaxian's board was its sequel, Galaga. In fact, Namco had partially completed a prototype before Namco R&D employee Ishimura decided it would be better to make Galaga on its own board. And as Namco was already exploring the new maze game genre with Pac-Man and Rally-X that year, management were also insisted the company make another Galaxian game.

Slow Bullet Hell

Galaga creator Shigeru Yokoyama saw fit to incorporate a bunch of features from its predecessor and King & Balloon into the new game. For example, they wanted to induce panic in the player by letting the screen litter with bullets, like when the King is being lifted offscreen in King & Balloon. However, this new hardware couldn't do that, so they made bullets fall faster.
In addition, there were a bunch of new features, big and small, that were implemented as development progressed. For example, as they experimented with ways enemies could attack the player, Yokoyama thought about giving enemies the capability to capture your ship, effectively costing a life. That came in the form of a tractor beam. Saving the captured ship would've originally been worth an extra life, but it was amended to join the ship in play that replaced it, so you can attack with twice the firepower. But this almost didn't work out as due to hardware limitations, only a certain number of sprites could appear onscreen, so what would've resulted in two individual ships fighting together became one 16-by-16 sprite that fired one 16-by-16 pair of bullets. Then briefly came the question of whether to align the dual fighter side-by-side or vertically. But obviously placing one ship on top of the other just didn't work, so they sat side-by-side.

Bonus Bonanza

Another new feature was the bonus stage (called "challenging stages" in Namco's games). Yokoyama took inspiration from the cutscenes in Pac-Man and the challenging stages that were in Rally-X, but didn't know what to implement for bonus stages in Galaga. That was when programmer Tetsu Ogawa reported a bug where enemies flew onscreen and off again, without firing. Yokoyama believed it would be enjoyable to just shoot at them without the fear of death, so that's how the challenging stage came to be. Additionally, the enemies would fly in one pattern, but many more patterns were added to stimulate replay value and challenge.

Up the Ante

Early location tests proved the game too easy as players could complete several stages with one credit and no continues, yielding low income. So, the team was told to make the game harder. Galaga was fully released in September 1981.